Case Study The Board of the Crescent City Health Department has approved the opening of a Family Wellness Center to address the high rates of obesity especially among children in the area. The Wellness Center will operate as a separate non-profit from the Health Department but governed by the same Board. The Wellness Center will accept memberships and focus on interventions for the entire family since factors contributing to obesity are often related not exclusively to children but to the entire family unit. The Wellness Center will rent the exercise equipment from the Acadiana Fitness Company for an annual rental fee of $15,000. An ideal location 6 blocks from the health department and within a four-mile radius of 4 elementary schools, 3 middle schools and 3 high schools and the 2 largest employers in the city has been selected at a rental fee of $19,000 annually with no additional charge for utilities. The local cable company quoted a monthly fee of $350 for cable, phone, and WIFI. The job description of the Crescent City Health Department's Accounts Receivable Manager and 2 accounting clerks in that office have been expanded to include duties to manage the billing and collections for the Family Wellness Center. These staff will not be employees of the Wellness Center, but $10,500 will be billed annually to the Wellness Center as reimbursement to the Health Department for the services provided. The Health Department's Maintenance Unit will also provide daily services and will bill the Wellness Center $4,000 annually. A Family Wellness Center Director will be recruited from the School of Public Health in New Orleans and will be paid $40,000 a year. The Family Wellness Center will employ the following staff to provide nutrition and exercise services for clients: 2 Health Education Counselors at an annual salary of $30,000 each 2 Exercise Trainers at an annual salary of $25,000 each The Board has approved pricing for annual membership in the Family Wellness Center at $500 /per individual or family membership. The membership price is a flat fee for the primary member with no limit on the # of immediate family members (spouse, children) who will have access to the Center. 60% of the members are expected to pay 100% of this price. 40% of the memberships are expected to receive a 40% reduction to the price if any of the immediate family members have a referral to the services of the Wellness Center from their Primary Care Physician. Linen annual cost is estimated to be $25 per individual or family membership. Locker annual cost is $30 per individual or family membership. Other Variable Costs are budgeted to be $41 per membership annually. Part I - 15 Points Calculate the Break-Even Quantity using the information provided in the Family Wellness Center Case Study. The matrix below is provided as a guide to assist you in organizing the data given to complete the problem. The Pope Francis Hospital is having a Board meeting to discuss building a new "Saint Brees" wing to the facility. The Payback Period is needed for the meeting. The "Saint Brees" wing will cost $10 million and is expected to generate the cash flows as shown below. Calculate the fraction of year in which payback is achieved. Values in Thousands Part Ill. Capital Budgeting - NPV 5 Points The Pope Francis Hospital is having a Board meeting to discuss building a new "Saint Brees" wing to the facility. The Net Present Value information missing from the table below is needed for the meeting. The "Saint Brees" wing will cost $10 million and is expected to generate the cash flows as shown below. The hospital's cost of funds is 8%. Calculate the missing information and provide an opinion on whether the hospital should undertake this project. Values in Thousands Case Study The Board of the Crescent City Health Department has approved the opening of a Family Wellness Center to address the high rates of obesity especially among children in the area. The Wellness Center will operate as a separate non-profit from the Health Department but governed by the same Board. The Wellness Center will accept memberships and focus on interventions for the entire family since factors contributing to obesity are often related not exclusively to children but to the entire family unit. The Wellness Center will rent the exercise equipment from the Acadiana Fitness Company for an annual rental fee of $15,000. An ideal location 6 blocks from the health department and within a four-mile radius of 4 elementary schools, 3 middle schools and 3 high schools and the 2 largest employers in the city has been selected at a rental fee of $19,000 annually with no additional charge for utilities. The local cable company quoted a monthly fee of $350 for cable, phone, and WIFI. The job description of the Crescent City Health Department's Accounts Receivable Manager and 2 accounting clerks in that office have been expanded to include duties to manage the billing and collections for the Family Wellness Center. These staff will not be employees of the Wellness Center, but $10,500 will be billed annually to the Wellness Center as reimbursement to the Health Department for the services provided. The Health Department's Maintenance Unit will also provide daily services and will bill the Wellness Center $4,000 annually. A Family Wellness Center Director will be recruited from the School of Public Health in New Orleans and will be paid $40,000 a year. The Family Wellness Center will employ the following staff to provide nutrition and exercise services for clients: 2 Health Education Counselors at an annual salary of $30,000 each 2 Exercise Trainers at an annual salary of $25,000 each The Board has approved pricing for annual membership in the Family Wellness Center at $500 /per individual or family membership. The membership price is a flat fee for the primary member with no limit on the # of immediate family members (spouse, children) who will have access to the Center. 60% of the members are expected to pay 100% of this price. 40% of the memberships are expected to receive a 40% reduction to the price if any of the immediate family members have a referral to the services of the Wellness Center from their Primary Care Physician. Linen annual cost is estimated to be $25 per individual or family membership. Locker annual cost is $30 per individual or family membership. Other Variable Costs are budgeted to be $41 per membership annually. Part I - 15 Points Calculate the Break-Even Quantity using the information provided in the Family Wellness Center Case Study. The matrix below is provided as a guide to assist you in organizing the data given to complete the problem. The Pope Francis Hospital is having a Board meeting to discuss building a new "Saint Brees" wing to the facility. The Payback Period is needed for the meeting. The "Saint Brees" wing will cost $10 million and is expected to generate the cash flows as shown below. Calculate the fraction of year in which payback is achieved. Values in Thousands Part Ill. Capital Budgeting - NPV 5 Points The Pope Francis Hospital is having a Board meeting to discuss building a new "Saint Brees" wing to the facility. The Net Present Value information missing from the table below is needed for the meeting. The "Saint Brees" wing will cost $10 million and is expected to generate the cash flows as shown below. The hospital's cost of funds is 8%. Calculate the missing information and provide an opinion on whether the hospital should undertake this project. Values in Thousands