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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. Part 5 Surgery for Middleboro As you are aware, Medical Associates has achieved its targeted utilization and financial projections for ambulatory surgery in Jasper. It is now time to consider a similar service at our offices in Middleboro. The physical facilities needed for ambulatory surgery will cost $450,000. Our cost of capital is 4 percent and the hurdle rate is 6 percent. The anticipated salvage value of these new fixed assets will be $150,000 after five years. To do this we will need to recruit two new general surgeons for our Jasper office, thereby freeing our Middleboro general surgeons to work in this new ambulatory surgical facility. We anticipate opening no earlier than January 2, 2016 Based on operational estimates, we anticipate that this project's annual operational revenue will exceed its operational expenses (R-E) for each of the first five years in accordance with the following schedule. Note that the operational expenses include all direct costs including salaries and benefits. Table III.6 Fiscal Implications of New Ambulatory Surgery Service 4/ 50, 000 R-E ($) Median Cases per Day (M-F) Year 01 20,000 9.0 2340 Year 02 40,000 Year 03 10.0 2400 60,000 Year 04 12.5 3250 100,000 Year 05 140,000 12.5 3 25 0 14.0 3640 We estimate that this unit, employing the standard R VU system used in hospitals, will do this? Why? generate 1.1 surgical procedures per case. Assess the financial implication. Should we BUDGET PROPOSAL