Reference no: EM131373436

Question 1

The following are the selected entries for Lehman Hospital for December 31, 2015 and 2014. Create Lehman Hospital's Balance Sheet.

	2015	2014
Bonds Payable	$64,000,000	$65,000,000
Current Assets	21,000,000	18,000,000
Current Liabilities	17,000,000	14,000,000
Property, Plant and Equipment	64,000,000	63,000,000
Net Assets (Equity)	4,000,000	2,000,000

Lehman Hospital
Balance Sheet
December 31, 2015
	2015	2014
Assets
	$	$
Total Assets	$	$
Liabilities & net assets (equity)
Liabilities
	$	$
Total Liabilities	$	$
(Net assets) equity
Total Liabilities and net assets (equity)	$	$

Question 2

Using the data from your balance sheet and the following income statementanswer the following

Lehman Hospital
Income Statement
For Year Ended December 31, 2015
Revenues	$96,000,000
Expenses	94,000,000
Net Income	$2,000,000

questions (5 points each).

Answer

(a) Compute the total profit margin ratio for 2015. Is this good if the industry average is 2.5

(b) Compute the return on assets ratio for 2015. Is this good if the industry average is 8.3%?

Note: To find total assets (in profit margin formula) to compare to the industry average, the total assets average must be calculated for both years, therefore (2015 assets+2014 assets)/2 = total assets.

(c) Compute the return on equity ratio for 2015. Is this good if the industry average is 5 percent?

Note: To find total equity (in return on equity formula) to compare to the industry average, the total equity average must be calculated for both years, therefore (2015 equity+2014 equity)/2 = total equity.

Question 3

Given the following data, complete the Cash Flow Analysis for Lehman Hospital:

Lehman Hospital is considering the purchase of a new MRI machine, which costs $3,000,000, with no salvage value and an expected life of five years. The MRI machine is expected to have fixed operating costs of $350,000 per year and variable operating costs of $10 per procedure. The equipment is expected to be used 20 times per day for 300 days a year, for each year of the life of the machine. The average billing price for one procedure is $100. All costs and revenues are expected to increase at a 5 percent inflation rate after the first year. The corporate cost of capital is 10%.

(a)
	Year
	0	1	2	3	4	5
Equipment Cost
Net Revenues
Fixed Operating Costs
Variable Operating Costs
Net Operating Income
Equipment Salvage Value
Net Cash Flow
		NPV manual calculation.
Corporate Cost of Capital
NPV
IRR

(b) What is the payback period for the project using the following timeline?

Year	0	1	2	3	4	5
Annual Cash Flows
Cumulative Cash Flows
Payback	?	Payback Calculation

Bonus Questions

(1) Using problem 12.3 (p. 385) of the text, create your own financial statement by changing the values for each section and solving.

(2) Recreate any problem from this course of your choosing. Please note the Chapter and formula that you are using to calculate your answer.