Based on the prior experience and the community needs, they estimate the following volume of diagnostic exams by Financial Class/Payor in the first year of operation. Financial Class/Payor Medicare & Medicare Managed Care Medicaid & Medicaid Managed Care Managed Care/Commercial Worker's Compensation Self-Pay X-ray Ct Scan MRI Total $250.00 $650.00 $1,050.00 Financial Class/Payor Medicare & Medicare Managed Care Medicaid & Medicaid Managed Care Managed Care & Commercial Worker's Compensation Self-Pay Supplies Rent X-ray $ $ Based on the current charges at their other diagnostic centers, gross charges for the new services will be as follows: $ $ $ 2,300 600 4,430 40 70 7,440 X-ray CT 1,240 240 1,770 Based on their current contracts with the different payors, they expect the net revenue per imaging will be as follows: 58.00 $ 54.00 $ 108.00 S 81.00 $ 49.00 S 30 30 3,310 MRI 1,390 550 3,290 130 30 5,390 MRI Total CT 166.00 S 265.00 148.00 S 243.00 315.00 S 450.00 238.00 $ 360.00 148.00 $ 216.00 4,930 1,390 9,490 200 130 16,140 Operating expenses are estimated as follows: Staffing: 2 Full Time Supervisors at $42.00 an hour, 9 Full Time Technicians/Technologists at $32.00 an hour, 3 Clerical staff at $22.00 an hour (1 FTE = 2,080 hours per year). Current benefits (including health insurance) are running at 30% of salaries. Other operating expenses: $8,000 per month $20,000 per month Utilities $10,000 per month Other department expenses $4,000 per month Direct Overhead expenses including billing, collection, coding, registration, etc. are estimated to be at $25 per exam. Corporate office overhead allocations are estimated at 20% of the total department expenses (including direct overhead but excluding depreciation). The capital expenditure for this project are estimated as follows: item Digital X-ray Machine CT Scanner MRI Machine Construction Cost for MRI Suite Other Construction/Renovation Cost Total Initial Cost Cost $ 300,000.00 $ 1,000,000.00 $ 1,800,000.00 $ 450,000.00 $ 350,000.00 $ 3,900,000.00 Imaging machines have 5 years of useful life. St Francis uses straight-line method to depreciate all imaging machines and other capital expenses related to installation and renovation of diagnostic centers. The best estimate of the machines net salvage value after the five years of use is $500,000. St. Francis Healthcare's weighted average cost of capital (WACC) is 12% and when budgeting for a new project. used as discount rate It is estimated that the gross charges will increase by 4% per year. It is a growing community and St Francis management expects that the volume will grow by 2% per annum. Based on their current insurance contracts, the Net Revenue is expected to increase by 3% per year. Also, expenses are expected to increase by 4% per year. e. Using the information given above, you are asked to develop a business plan for this Outpatient Diagnostic center. The business plan should include the following data/information: 1. a. Gross and Net Patient Service revenue by Financial class/Payor budget for the period of 5 b. Detail Expense budget for 5 years. years. C. Income statement for 5 years. d. What is the project's payback period? What are the deficiencies of payback method when used as a project selection criterion? What is the project's NPV at WACC of 12%?