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