2015	2016	2017	2018	2019
Revenue		4000000	4400000	4840000	5324000	5483720
Net Operating Profit Margin Dollars		500000	550000	605000	665500	685465
Cost of Capital =	0.1
3-year growth rate =	0.1
Long-term growth rate =	0.03
Net Operating Profit Margin Percent
500,000/4,000,000 =	0.125
Terminal Value of NOPM dollars at beginning of 2019:
685,465/[1 + (10% - 3%)] =		640621.4953
PV of 2019 NOPM Terminal Value		-481308.4112	NEED EXPLANATION OF HOW TO COME UP WITH PV OF 2019 NOPM TERMINAL VALUE
PV of 2018 NOPM Dollars =		-500,000
PV of 2017 NOPM Dollars =		-500,000
PV of 2016 NOPM Dollars =		-500,000
Total of PVs =		-1,981,308.41
Add Debt		400000
Highest fair purchase price =		1,581,308.41

case 7.1: North Bend Hospital toss 1 es Parsimonious forecasting of free cash flows ,f. Key concept. orth Bend Hospital (NBH) is a profitable, rapidly growing hospital system in the Pacific Northwest. Part of its growth strategy is to purchase physician prac ces and integrate them into the NBH system retaining the physicians as employees CFo has entered into purchase discussions with Rogue River Medical Asso- dates (RRMA), a physician practice employing 15 physicians with various specialties RRMA reported fiscal year 2015 revenues of S4,000,000, with a net operating profit margin of $500,000. Its December 31, 2015, financial statements revealed that net oper ating assets totaled S600,000 and debt totaled $400,000. The CFO of NBH estimates that RRMA revenue will grow at a rate of 10 percent ear for the next three years and then slow to a long-term growth rate of 3 percent. per a stable net operating He thinks that physician compensation agreement will maintain profit margin and that the current margin will be able to be maintained indefinitely. Net operating a are expected to grow at 5 percent per year for three years and then slow to 2 percent indefinitely. the CFo been The NBH historical cost of capital is 10 percent, but has current using a 12 percent hurdle rate for capital investments. RRMA has suggested that it would accept a purchase offer of S4 million. RRMA is willing to take a S500,000 initial payment, with the balance paid at the rate of S500,000 per year (payment includes implicit interest at percent) until the purchase price is paid. 5 Y number