Is the emergency center a wise use of the hospital''s , Financial Accounting

Consider a not-for-profit hospital faced with a familiar choice: to open or not to open an emergency center in a new suburban hospital shopping mall.  The mall's developers claim that referrals alone will make the center a financial winner of the hospital.  Cautious analysis in the comptroller's office argue that the startup costs of the center, and its annual cash outflows (including insurance), will be a major drain on the hospital's overall cash flow.  Initial cash outflows for the center are projected as follows: $300,000 for equipment, furniture, and fixtures; and $75,000 for new working capital (inventory, accounts receivable, cash on hand).  Analysts in the planning department estimate that the center will generate 8 visits per day, 7 days per week, 52 weeks per year, with average cash inflow per visit of $50.  The planning analysts also estimate $125,000 per year in net cash flows from increased admissions to the hospital.  Annual operating expenses of the center will be $200,000.  The hospital's weighted average cost of capital is 5 percent.  As a not-for-profit provider, the hospital has zero income tax rate.  The center has a expected life of 10 years and the expected salvage value of the clinic after 10 years will be $50,000.  Is the emergency center a wise use of the hospital's limited funds? You may use the following framework to set up the problem (10 points).

Year    Cash        Direct Cash    Indirect Cash    Net Cash    
        Outflow        Inflow              Inflow              Flow        

0                                    
1                                    
2                                    
3                                    
4                                    
5                                    
6                                    
7                                    
8                                    
9                                    
10

Posted Date: 3/14/2013 3:59:35 AM | Location : United States







Related Discussions:- Is the emergency center a wise use of the hospital''s , Assignment Help, Ask Question on Is the emergency center a wise use of the hospital''s , Get Answer, Expert's Help, Is the emergency center a wise use of the hospital''s Discussions

Write discussion on Is the emergency center a wise use of the hospital''s
Your posts are moderated
Related Questions

What do you mean by base case NPV?

What is asset turnover - Asset turnover is a ratio which is considered as measures the effectiveness with which a business uses its assets in relation to the level of sales or inc

You have observed the following returns over time: Year Stock X Stock Y Market 2006 13% 13%

Question 1 Define Accounting. Briefly explain the ‘Entity Concept' and ‘Money Measurement Concept' of accounting Question 2 What is rectification of errors? List and explain the

What are some examples of adjusting entries that are made at the end of the accounting period to bring general lever accounts balance in accordance with GAAP.

1. Jim buys only milk and biscuits.    (a) In 2004, Jim earns $100, milk costs $2, biscuits cost $4 per dozen. Draw Jim's budget constraint  (b) Now suppose that all prices i

Q. Define Risk-adjusted discount rates? One technique in this heading is the assignment of investment projects to one of a set of risk classes all of which has a different disc


Gary and Joyce Yau, both 30, last month bought their dream house in London, Ontario. The purchase price was $450,000 plus addition fees such as taxes, legal fees, administration fe