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Add or drop decision.
The Ancome County Health Department is considering using 300 square feet of excess office space to provide a clinic for Healthchek visits. These visits are reimbursed at $67.30 under a Medicaid program.
Variable costs per visits are $53.30, and providing the service requires an additional physician assistant and nurse with prorated salaries of $90,000 and $50,000, respectively.
The state has mandated efforts to increase the utilization of Medicaid eligibility, so the Department of Social Services is conducting interventions to increase eligibility awareness in the community.
As a result, the health department expects 10,000 Healthchek visits in the coming year. Unavoidable overhead costs for the health department are $300,000 per year and will be allocated to each program based on its proportional share of the health department?s total office space of 2,700 square feet.
If the appropriate interest rate is 8 percent, how much more is Nancy's cash flow worth?
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