Comparison of Financial Ratios by Bond Rating

Bond Grade Days Cash on Hand	AA 194	BBB 53.6
Days in Accounts Receivables	58.0	47.7
Days in Current Liabilities	62.3	64.7
Cash to Debt (%)	153.9	37.9
Total Margin-%	4.1	(0.3)
Salaries and benefit costs as

% of Total Revenue	49.9	56.3
Average Age of Plant (years)	9.5	13.4
Capital Expenditures as % of Depreciation Expense	169.9	76.2

Our annual interest cost of long-term borrowing would be 3.0 percent if our bonds were rated high grade and 7.5 percent if rated below investment grade. Assume that ten- year bonds are used to finance this additional debt. What would be the annual principal and interest payment for this amount? Can Webster Hospital afford this increased annual expense? Note that for every $100,000 borrowed over ten years, our monthly payments would be $989 at 3.5 percent or $1,136 at 6.5 percent.