Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fargo Memorial Hospital has annual net patient service revenues of $14.4 million. The hospital's patient accounts manager estimates that 10 percent of third party payers

Fargo Memorial Hospital has annual net patient service revenues of $14.4 million. The hospital's patient

accounts manager estimates that 10 percent of third party payers pay on Day 30, 60 percent pay on Day 60,

and 30 percent pay on Day 90.

a. What is Fargo's average collection period? (Assume 360 days per year throughout this problem.)

b. What is the firm's current receivables balance?

c. What would be the firm's new receivables balance if a newly proposed electronic claims system resulted

in collecting from third-party payers in 45 and 75 days, instead of in 60 and 90 days?

d. Suppose the firm's annual cost of carrying receivables was 10 percent. If the electronic claims system

costs $30,000 a year to lease and operate, should it be adopted? (Assume that the entire receivables

balance has to be financed.) Must show all work

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Exchange Rates and International Finance

Authors: Laurence Copeland

6th edition

273786040, 978-0273786047

More Books

Students also viewed these Finance questions