# Finance for Health Care- Capital Budgeting

Capital Budgeting

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Instructions

For this Assignment, you will complete a cash flow analysis for a new MRI service for the physician’s network. Based upon your analysis, you will recommend whether the new MRI service is a sound financial decision for the physician’s network.

Requirements

Times New Roman font

12 font

NO plagiarism

To see the Chapter 9 & 10 information click on the link before, and then click on Courtesy eTextbook (7 days FREE) link.

http://www.chegg.com/textbooks/fundamentals-of-healthcare-finance-2nd-edition-9781567934755-1567934757

Consider the following information:

The estimated average is \$1000 per scan. 25% of this average is expected to be lost on discounts to payers, charity care, and losses.

Each scan will cost the physician’s network \$40 to in supplies

The MRI service is expected to operate 50 weeks per year. 1.5 full-time employees will be required with an annual labor cost of \$70,000, including benefits.

There are no increased overhead costs associated with the opening as the physician’s network has an existing building that is currently vacant.

Annually, the MRI machine requires \$125,000 in maintenance costs.

The long-term plan is to utilize this MRI system for five years. At this end of this period, the physician’s network will sell the MRI for salvage for \$750,000 (deducting any removal costs). The inflation rate is averaged at 5% for the period. This inflation rate is expected to affect all revenues and costs equally.

The profitability measures are: Net Present Value = \$83,478 with an internal rate of return equal to \$11.1%.

Complete a cash flow analysis utilizing the information above and below to create your Cash Flow Chart.

Assume the following in your analysis:

A MRI System will cost: \$2.5 million

Delivery, Installation and site preparation will cost: \$500,000

To present your analysis, the physician’s network has asked you to prepare a report. This report will be in two parts. * The first section will be a written report (in essay format) that includes an introduction of what will be included in the report, a detailed summary of the cash flow analysis, and a determination by you as to whether you recommend that the new MRI services to be a sound financial decision.

The second portion of the report will be your cash flow analysis in the form of a spreadsheet.

For the report to be effective, it should be no less than five pages total, including references.

Unit 9 Assignment Grading Rubric = 325 points

Assignment Requirements Points possible

Points earned by student

Report includes an introduction  (0-25)

Report includes a detailed summary of the cash flow analysis (0-75)

Report includes a decision summary (recommendation or declination) based off of the cash flow analysis

(0-75)

Report includes a conclusion paragraph summarizing the written portion (0-50)

Report includes a spreadsheet cash flow analysis (0-100)

Total (Sum of all points)

To see the Chapter 9 & 10 information click on the link before, and then click on Courtesy eTextbook (7 days FREE) link.

http://www.chegg.com/textbooks/fundamentals-of-healthcare-finance-2nd-edition-9781567934755-1567934757

– THE ATTACHMENT SHOWS EVERYTHING THAT IS NEED. THERE IS A CHART THAT WILL HELP TAT DID NOT SHOW UP ON THE ORIGINAL ONE.

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