Carson Hospital, a for profit organization, held its Board of Directors meeting. The Board was concerned about the financial status of the hospital and its poor performance. See Exhibit A and B for the Financial Statements. The hospital is supposed to maintain the following ratios and capital reserve as requested by the Board: Debt to Equity 40% Return on Equity 8% Profit Margin 5% Capital Reserve $5M (held in long term investments) William Mays, the CEO, convinced the Board that the hospital needs to upgrade its cardiac services to better serve the community which has been going to a competitor hospital for these services. Mr. Mays had done some preliminary research and estimated that it would cost the hospital approximately $50M $60M for the a state of the art unit. The Board asked Mr. Mays to come back to the next meeting to present the Sources and Uses of Funds for this project and how it would improve its performance to meet the requirements established. The Board does not want to issue stock and would allow an increased debt to equity ratio for 10 years as of the end of the 10 years, it would have to meet the required ratios. The reserve must stay at $5M. Mr. Mays met with you, his management team, and asked for you to help him prepare for the next Board meeting. He showed his concern about: 1. Hospital contracts should have a collection rate of 70%, the Statement of Operations shows that it only collects 64.2% when there has not been a shift in p mix 2. Days in AR is running at 48.7 when it should be closer to 45 and bad debt expense is at an all time high of 3.2% when it had run at less than 2% in the past. He asked that you do the following: 1. How can this project be financed? (Hint: Use Table 21-7 as a guide) 2. What areas of the Revenue Cycle need to be enhanced and recommendations 3. Any other areas that need to be addressed, and recommendations 4. He requires that financing be only for 80% of the project Carson Hospital, a for profit organization, held its Board of Directors meeting. The Board was concerned about the financial status of the hospital and its poor performance. See Exhibit A and B for the Financial Statements. The hospital is supposed to maintain the following ratios and capital reserve as requested by the Board: Debt to Equity 40% Return on Equity 8% Profit Margin 5% Capital Reserve $5M (held in long term investments) William Mays, the CEO, convinced the Board that the hospital needs to upgrade its cardiac services to better serve the community which has been going to a competitor hospital for these services. Mr. Mays had done some preliminary research and estimated that it would cost the hospital approximately $50M $60M for the a state of the art unit. The Board asked Mr. Mays to come back to the next meeting to present the Sources and Uses of Funds for this project and how it would improve its performance to meet the requirements established. The Board does not want to issue stock and would allow an increased debt to equity ratio for 10 years as of the end of the 10 years, it would have to meet the required ratios. The reserve must stay at $5M. Mr. Mays met with you, his management team, and asked for you to help him prepare for the next Board meeting. He showed his concern about: 1. Hospital contracts should have a collection rate of 70%, the Statement of Operations shows that it only collects 64.2% when there has not been a shift in p mix 2. Days in AR is running at 48.7 when it should be closer to 45 and bad debt expense is at an all time high of 3.2% when it had run at less than 2% in the past. He asked that you do the following: 1. How can this project be financed? (Hint: Use Table 21-7 as a guide) 2. What areas of the Revenue Cycle need to be enhanced and recommendations 3. Any other areas that need to be addressed, and recommendations 4. He requires that financing be only for 80% of the project