Northeast Hospital is analyzing a potential project for a new outpatient center

Present a Sensitivity Analysis of your Income Statement, Cashflow, Resulting NPV, IRR and MIRR assuming the following Best Case, Most Likely Case and Worst Case using the following key indicators.

Best Most Likely Worst

Total Visits 60000 55000 50000

Revenue per Visit $90.00 $75.00 $65.00

Salvage Value $800,000.00 $750,000.00$650,000.00

Year 1 Year 2 Year 3 Year 4 Year 5 Year6 Year 7

Total projected Visits

Average Revenue per visit

Average Variable Cost per Visit $50.00

Total Fixed Costs $500,000.00

Purchase Price for Equipment $4,500,000.00

Monthly Rental Cost to Occupy the New Site $5,000.00

Salvage Values of the Equipment (end of Year 7)

Corporate Tax Rate 40%

Cost of Capital 8%

Other Assumptions will be the same for Best, Most Likely and Worst Case

1) Projected Visits are Expected to increase by 10% in Year 2, 5% in Year 3 and 3% each Year thereafter

2)Negotiation with payers indicate that revenue rate (ie payment per visits) will increase by 2% each year and 5% in year 5 then 2% thereafter

3)Variable Costs are expected to rise at a rate of 2% per year

4) Fixed Costs are expected to rise at a rate of 1% per year

5) Rent rates will be increased by 2.5% at the end of each year

6) The equipment will depreciate based on the straight-line method of depreciation, a 7-year estimated life and the equipment will be sold at salvage value at the end of year 7

7)Tax rate will remain constant for the entire 7-year Period and do not assume any tax loss carry forward