0	1	2	3	4	5
Assumptions			Additional volume		100	100	100	100	100
Costs			Additional revenue
Simulator cost	$4,000		Additional procedure revenue		$45,000	$45,000	$45,000	$45,000	$45,000
Additional front desk time	10,000		Downstream surgical revenue		$2,000	$2,000	$2,000	$2,000	$2,000
Additional supplies per procedure	$200		Additional costs
Benefits			Simulator purchase	$4,000
Revenue per procedure	$450		Additional front desk time		10,000	10,000	10,000	10,000	10,000
Additional procedures	100		Additional supplies per procedure		$20,000	$20,000	$20,000	$20,000	$20,000
% of procedures requiring future surgery	2%		Net cash flows	($4,000)	$17,000	$17,000	$17,000	$17,000	$17,000
Profits from future surgery	$1,000
Discount rate	8%		NPV	$63,876
			IRR	425%
			Payback period	1 year

2. Im providing you with an Excel file that models the financial effects of the colonoscopy simulation. Use this file to do sensitivity analysis of the three key assumptions you've identified (the number of additional annual procedures, the percent of procedures resulting in follow-up surgeries and the profit from each surgery).

The inputs to your sensitivity analysis will be the values of the assumptions identified above. For instance, 0.25% and 2% for the assumption about the percent of colonoscopies requiring future surgery.

Add tables with your sensitivity analysis to the excel file I provide, save your changes and upload the file.

You can use this analysis to answer questions 3-8.

3. What will the NPV for the simulation program be if the program only results in 10 additional procedures (instead of the base-case estimate of 100)?

4. What will the NPV for the simulation program be if the program results in 150 additional procedures (instead of the base-case estimate of 100)?

5. What will the NPV of the simulation program be if only 0.25% of colonoscopies result in the need for additional surgery (instead of the base-case estimate that 2% of colonoscopies will require follow-up surgery)?

6. What will the NPV of the simulation program be if the profits from additional polyp-removal surgeries are $250 per surgery (instead of the $1,000 base-case estimate)?

7. What will the NPV of the simulation program be if the profits from additional polyp-removal surgeries are $1,250 per surgery (instead of the $1,000 base-case estimate)?

8. Based on your answers to questions 3-7 and your sensitivity analysis, which of your three assumptions (the number of additional annual procedures, the percent of procedures resulting in follow-up surgeries and the profit from each surgery) do you think is most important to the financial success of the proposed simulation?

9. The practice manager for the gastroenterology believes that the simulation cant be a financial success without increasing colonoscopy volume. (Hopefully you agree).

She wants to use this information to insure the success of the project. Since most of the new procedures will be offered after 5pm, she considers offering an evening discount on the price. This would reduce the assumed revenue per procedure. Assuming that the number of additional procedures stays constant, whats the lowest price the practice can offer for an after-hours procedure without losing money on the simulation project?