Questions and Answers of Financial Management For Public Health

Trade Credit Discount. Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?a. 1/10 net 20b. 1/10
Trade Credit Discount. Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?a. 2/10 net 20b. 2/10
Trade Credit Discount. Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?a. 1/10 net 30b. 1/15
Trade Credit Discount. Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?a. 2/10 net 30b. 2/15
Trade Credit Discount. Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?a. 1/5 net 30b. 2/5 net
Trade Credit Discount. Compute the annual interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?a. 1/10 net 30b. 2/10 net 30c. 3/10
Accounts Receivable Management. Given the information below, compute the days in accounts receivable, aging schedule, and accounts receivable as a percentage of net patient revenues for Quarter 1 and
Accounts Receivable Management. Given the information below, compute the days in accounts receivable, aging schedule, and accounts receivable as a percentage of net patient revenues for Quarter 1 and
Accounts Receivable Management. Given the information below, compute the days in accounts receivable, aging schedule, and accounts receivable as a percentage of net patient revenues for Quarter 1 and
Accounts Receivable Management. Given the information below, compute the days in accounts receivable, aging schedule, and accounts receivable as a percentage of net patient revenues for Quarter 1 and
Compensating Balance. On January 2, 20X1, City Hospital established a line of credit with First Union National Bank. The terms of the line of credit called for a $200,000 maximum loan with an
Compensating Balance. Lawrence Hospital wishes to establish a line of credit with a bank. The first bank’s terms call for a $300,000 maximum loan with an interest rate of 11 percent and a $1,000
Cash Budget. Jay Zeeman Clinic provided the following financial information in Exhibit 5–13. Prepare a cash budget for the quarter ending March, 20X1.
Cash Budget. Iowa Diagnostic Center provided the following financial information in Exhibit 5–14. Prepare a cash budget for the quarter ending March, 20X1.
Cash Budget. Stacie Zeeman Clinic provided the following financial information in Exhibit 5–15. Prepare a cash budget for the quarter ending March, 20X1.
Cash Budget. Happy Valley Rehab Facility provided the following financial information in Exhibit 5–16. Prepare a cash budget for the quarter ending March, 20X1.
Cash Budget. How would the cash budget in Problem 41 change if new credit and collection policies were implemented such that collections resulted as follows:40% month earned 30% + 1 month 10% + 2
Cash Budget. How would the cash budget in Problem 42 change if new credit and collection policies were implemented such that collections resulted as follows:40% month earned 30% + 1 month 10% + 2
Discounts. Stacie Zeeman Clinic in Exhibit 5–15 is going to take better advantage of credit terms offered by suppliers. The clinic has negotiated a 3 percent discount for all supplies purchases
Discounts. Happy Valley Clinic in Exhibit 5–16 is going to take better advantage of credit terms offered by suppliers. The clinic has negotiated a 3 percent discount for all supplies purchases
Definitions. Define the following terms:a. Annuity.b. Annuity Due.c. Compound Interest Method.d. Compounding.e. Discounting.f. Future Value.g. Future Value Factor.h. Future Value Factor of an
Simple and Compound Interest. What is the difference between simple interest and compound interest?
Defining Future Value Equation Terms. Write out the future value of an amount equation, and define each of the terms in it.
Defining the exponent. Does the n in the formula (1 + i)n always mean compounding on an annual basis?
Multiple compounding periods in a year. How should the future value equation be modified if compounding occurs more frequently than annually?
Multiple compounding periods in a year (continued). What is the future value of $10,000 with an interest rate of 16 percent and one annual period of compounding? With an annual interest rate of 16
Multiple compounding periods in a year (continued). Based on the answer to Question 6, explain why the investment increases in value when the number of compounding periods increases.
Present and Future Value Factors. What is the relationship between the present value factor and the future value factor?
Present Value Factor and Discount Rate. What happens to the present value factor as the discount rate or interest rate increases for a given time period? If the discount rate or interest rate
Relationship between Ordinary Annuity and Annuity Due. Compare the results of the present value of a $6,000 ordinary annuity at 10 percent interest for 10 years with the present value of a $6,000
Perpetuities. How many years in a typical perpetuity?
Factors. What is the relationship between the future value factor for five years at 5 percent and the present value factor for five years at 5 percent.
Future Value of an Annuity Table. In the future value annuity table at any interest rate for one year, why is the future value interest factor of this annuity equal to 1.00?
Present Value of an Amount and Present Value of an Annuity.What is the relationship between the present value of a single dollar payment formula and the present value of an ordinary annuity formula
If a nurse deposits $1,000 today in a bank account and the interest is compounded annually at 12 percent, what will be the value of this investment:a. five years from now?b. ten years from now?c.
If a nurse deposits $10,000 today in a bank account and the interest is compounded annually at 12 percent, what will be the value of this investment:a. three years from now?b. six years from now?c.
If a business manager deposits $200 in a savings account at the end of each year for twenty years, what will be the value of her investment:a. at a compounded rate of 10 percent?b. at a compounded
If a business manager deposits $2,000 in a savings account at the end of each year for twenty years, what will be the value of her investment:a. at a compounded rate of 15 percent?b. at a compounded
The CFO of a home health agency needs to determine the present value of a$5,000 investment received at the end of year 10.What is the present value if the discount rate is:a. 5 percent?b. 10
The CFO of a home health agency needs to determine the present value of a$50,000 investment received at the end of year 15.What is the present value if the discount rate is:a. 4 percent?b. 8
If a hospital were to receive $4,000 in payments per year at the end of each year for the next 12 years from an uninsured patient who underwent an expensive operation, what would be the current value
If a hospital were to receive $14,000 in payments per year at the end of each year for the next 6 years from an uninsured patient who underwent an expensive operation, what would be the current value
After completing her residency, an obstetrician plans to invest $10,000 per year at the end of each year in a low-risk retirement account. She expects to earn five percent for 35 years. What will her
After completing her residency, an oncologist plans to invest $15,000 per year at the end of each year in a high-risk retirement account. She expects to earn ten percent for 35 years. What will her
Lincoln Memorial Hospital has just been informed that a private donor is willing to contribute $1,000 per year at the beginning of each year for 15 years. What is the current dollar value of this
Boulder City Hospital has just been informed that a private donor is willing to contribute $20,000 per year at the beginning of each year for 15 years.What is the current dollar value of this
If a community clinic invested $4,000 in excess cash today, what would be the value of its investment at the end of three years:a. at a 16 percent rate compounded semiannually?b. at a 16 percent rate
If a community hospital invested $8,000 in excess cash today, what would be the value of its investment at the end of three years:a. at a 32 percent rate compounded semiannually?b. at a 32 percent
Love Canal General Hospital wants to purchase a new blood analyzing device today. Its local bank is willing to lend it the money to buy the analyzer at a 2 percent monthly rate. The loan payments
General Hospital wants to purchase a new MRI today. Its local bank is willing to lend it the money to buy the MRI at a 3 percent monthly rate.The loan payments will start at the end of the month and
Midstate Medical Center is starting an endowment fund to pay for the expenses of a medical research program. The expenses are $2,000,000 per year and the program is expected to last for ten years.
Seaside Medical Center is starting an endowment fund to pay for the expenses of a community outreach pediatric program. The expenses are$500,000 per year and the program is expected to last for five
In 2000, Lilliputian County Hospital’s total patient revenues were $20 million. In 2008, patient revenues are expected to be $40 million. What is the compound growth rate in patient revenues over
In 2001, Wythe County Hospital’s total patient revenues were $5 million. In 2010, patient revenues were expected to be $27.75 million. What was the compound growth rate in patient revenues over
Shawnee Valley Family Practice Center plans to invest $30,000 in a money market account at the beginning of each year for the next five years. The investment pays 12 percent annual interest. How much
Starting today, and every six months thereafter for the next ten years, St Luke’s Hospital plans to invest $50,000 at 10 percent annual interest in an account. How much would this investment be
Dr Thomas plans to retire today and would like an income of $200,000 per year for the next 15 years with the income payments starting one year from today. He will be able to earn interest of 9
Today, Williamson Hospital lends its Home Health Care Center $938,510.The center expects to repay them in quarterly installments for three years of$100,000 with the first payment starting one quarter
Goldfarb Cancer Research Institute just received a $1.2 million gift to cover the salary for a permanent scientific research position to study Hodgkin’s Disease. What would be the required rate of
Upon the untimely and tragic death of their wealthy aunt, the heirs wanted to memorialize her with a named donation to the local hospital. They offered the hospital a choice of $30,000 annual
Stillwater Hospital is borrowing $2,000,000 for its medical office building.The annual interest rate is 6 percent. What will be the equal annual payments on the loan if the length of the loan is 4
Williamsburg Nursing Home is investing in a restricted fund for a new assisted-living home. How much do they need to invest each year in order to earn $5,000,000 after 15 years:a. If the expected
Carondelet Hospital is evaluating a lease arrangement for its ambulance fleet.The total value of the lease is $405,000. The hospital will be making equal monthly payments starting today.a. What is
A wealthy philanthropist has established the following endowment for a hospital. The details of the endowment include the following:a. A cash deposit of $10 million one year from now.b. An annual
Define the following terms:a. Cannibalization.b. Capital Appreciation.c. Cost of Capital.d. Discount Rate.e. Discounted Cash Flows.f. Dividends.g. Expansion Decisions.h. Goodwill.i. Hurdle Rate.j.
Comment on the following statement. “When a not-for-profit facility receives a contribution from a member of the community, the cost of capital is inconsequential when deciding how to use this
From a capital investment point of view, what are the goals of a health care facility?
What are the primary drawbacks of the payback method as a capital budgeting technique?
When using the IRR approach, when can the internal rate of return be determined simply by dividing the initial outlay by the cash flows?
Explain why pro forma income statements adjust for depreciation expense when developing projected cash flows for a project.
If a hospital were considering a new Women’s Health Initiative, what spillover cash flows might result?
When performing a capital budgeting analysis, what costs should be included, and what costs should be excluded as part of the initial investment?
Why are financing flows such as interest expense and dividend payments excluded from the computation of cash flows?
Will a decision that is based upon NPV ever change if it were based upon IRR instead? Why or why not?
Marleboro Memorial Hospital is expecting its new cancer center to generate the following cash flows:a. Determine the payback for the new cancer center.b. Determine the net present value using a cost
Buxton Community is expecting its new dialysis unit to generate the following cash flows:a. Determine the payback for the new dialysis unit.b. Determine the net present value using a cost of capital
Letterman Hospital expects Projects A and B to generate the following cash flows:a. Determine the net present value for both projects using a cost of capital of 15 percent.b. Determine the net
Castle Rock Medical Center expects Projects X and Y to generate the following cash flows:a. Determine the net present value for both projects using a cost of capital of 13 percent.b. Determine the
Goodbar Practice expects Projects 1 and 2 to generate the following cash flows:a. Determine the payback for both projects.b. Determine the internal rate of return.c. Determine the net present value
Martin Medical expects Alpha Project and Beta Project to generate the following cash flows:a. Determine the payback for both projects.b. Determine the internal rate of return.c. Determine the net
Tin Man Memorial Hospital, a non-taxpaying entity, is starting a new heart center. The expected patient volume demands will generate $8,000,000 per year in revenues for the next five years. The
Fall City Healthcare System, a non-taxpaying entity, is going to build a satellite ancillary facility. The tests will generate $15,000,000 per year in revenues for the next five years. The expected
Due to rising fuel prices, Eastern Community Hospital wants to replace its existing fleet of ambulances with a more fuel-efficient fleet. The existing fleet was purchased three years ago for $150,000
Because of a rise in chart requests complicated by constant turnover within the Medical Records Department, Valley Regional wants to replace its existing medical records system with a labor saving
Washington Federal Hospital plans to invest in a new X-ray machine. The cost of the machine is $800,000. The machine has an economic life of seven years, and it will be depreciated over a seven-year
Lima Radiological Services has seen a growth in patient volume since its primary competitor decided to relocate to a different area of the city. To accommodate this growth, a consultant has advised
Nimble Nursing Homes, Inc. owns an abandoned schoolhouse. The after tax value of the land is $600,000. The furniture and fixtures of the school have been fully depreciated to an after tax market
Ridgewood Healthcare Enterprises is in possession of a non-operational 70-bed hospital. The after tax value of the land is $500,000. The equipment and the building are fully depreciated and have an
Faith Hospital, a tax-paying entity, wants to replace its current telemedicine system with a new version, which would cost $6 million. This new system has a five-year life and would be depreciated
Queen Victoria Hospital, a for-profit institution, wants to replace its CT scanner with a new model. The cost of the new CT scanner is $5 million. The current CT scanner was purchased three years ago
Alvin Hospital, a taxpaying entity, is considering a new pediatrics emergency room (ER). The building and equipment for the new pediatric ER will cost $10 million. The equipment and building will be
Blackmoore Radiology, a taxpaying entity, is considering a new outpatientimaging center. The building and equipment for the new center will cost $40 million. The equipment and building will be
Definitions. Define the following terms:a.Amortization.b.Bond.c.Capital Lease.d.Collateral.e.Discount.f.Feasibility Study.g.Financial Lease.h.Fixed Income Security.i.Hedging.j.Lessee.k.Lessor.l.
Equity Position. What avenues are available for for-profit and not-for-profit health care providers to increase their equity position?
Debt versus Equity Financing. What are the advantages and disadvantages to a taxpaying entity in issuing debt as opposed to equity?
Debt Financing. Does adding debt increase or decrease the flexibility of a health care provider? Why?
Basis Points. How much is a basis point? How many basis points between 6 5 8percent and 6 3 4 percent?.
Debentures. Explain the difference between subordinated debentures and debentures.
Bonds. Name at least two factors that might cause a facility to call in its bond.
Bonds. What are the advantages and disadvantages of a taxable bond relative to a tax-exempt bond? Who is the issuer of tax-exempt bonds?

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