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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
On January 1, 2010, Anderson Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued
question 5 chapter 5
if you inherited 45,000 today and invested all of it in a security that paid a 7 percent rate of return how much would you have in 25 years
PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS OF LIMITED COMPANIES This is a chapter dealing with company financial statements, a topic frequently examined. Do not be
Q. Define the 401 Plan? 401(k) Plan - EMPLOYEE BENEFIT PLAN authorized by INTERNAL REVENUE CODE section 401(k), whereby an employer establishes an account for every participati
Seattle Health Plans currently uses zero debt financing. Its operating income (EBIT) $1 million, and it pays taxes at a 40 percent rate. It has $5 million in assests and because
Example of FNSD Inventory
d. Prepare the summary journal entry required to transfer finished component kits from the Cutting Department to the Finishing Department in January. e. Compute the total cost assi
An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital
Purchases office supplies on account costing $12,600 during July. It pays $5,500 for these purchases during July and the remainder during August. Office supplies on hand on July 1
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