Part 5Surgery 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 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.

I just want help I do not understand any of this question. It does not sound right to me

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

R-E ($)Median Cases per Day (M-F)

Year 01

20,000

9.0

Year 02

40,000

10.0

Year 03

60,000

12.5

Year 04

100,000

12.5

Year 05

140,000

14.0

We estimate that this unit, employing the standard RVU system used in hospitals, will generate 1.1 surgical procedures per case. Assess the financial implication. Should we do this? Why?