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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
Proposed dividends by subsidiary company If the subsidiary company has proposed some dividends appearing under current liabilities then the dividends are payable to the holding c
1. The acceptance of a capital budgeting project is usually evaluated on its own merits. That is, capital budgeting decisions are treated separately from capital structure decision
The balance sheet of Marilyn and Monroe was as follows immediately prior to the partnership's being liquidated: cash, $25,426; other assets, $130,439; liabilities, $22,198; Marilyn
Leverage or Gearing Ratios - These ratios include the Long Term Debt to Equity Ratio, Total Debt to Equity Ratio, Interest Coverage Ratio. Here, the interest coverage ratio is al
Common stocks A, B, C, and D had the following quarterly returns. A B C D 0.07 0.05 0.07 0.12
Accounting objectives Accounting has two main objectives: To assist control over the assets and liabilities, and the income and expenditure of the enterprise; and To
recommendation regarding the current south African vat system
VESTING OF PROPERTY IN TRUSTEES The settlor must transfer the property to the original trustees in the proper legal manner. Similar transfers must be made on a change of truste
The cost of debt must be based upon the current market cost of debt. Where different kinds of debt are used estimates of more than one debt cost may be necessary and these costs we
Answer to Question Six Summarised consolidated statement of comprehensive income for the A group for the year ended 30 September 2010 All workings
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