Please answer the 4 questions below and show the work in detail.
1. Why is a dollar today worth more than a dollar received in the future?
2. A health system has forecasted net patient revenue in the first 3 months of the year as follows (figures in millions): January, $200; February, $140; March, $100. Fifty percent of services are usually paid for in the month that they take place, 30% in the following month, and the final 20% in the next month. Receivables at the end of December were $100 million. What are the forecasted collections on accounts receivable in March?
3. Your organization has been asked to invest in a continuing care retirement center. Your investment will be $600,000 per year for the next 5 years. After 5 years, cash flows will be $400,000 per year for the next 15 years. If your discount rate is 10%:
(a) what is the present value of the investment?
(b) what is the present value of the cash flows?
(c) what is the profitability index?
4. Biogen, Inc., has a cost of capital of 9%, and it has a project with the cash flows listed below. What is the NPV of this project?
Year 0 (100,000)
Year 1 (20,000)
Year 2 20,000
Year 3 100,000
Year 4 150,000
Year 5 175,000
