Patient care has become a primary focus in the development of new healthcare technology. Technological development in clinical applications is a significant trend in healthcare currently, and hospitals worldwide are adopting exciting new innovations in the area of patient care. A 2016 survey circulated among healthcare providers indicated (HIMSS, n.d.) indicated that 74% of healthcare professionals consider Information Technology to be a critical tool in clinical settings, for instance. In a hospital setting, in particular, patient monitoring is a critical aspect of patient care in a hospital setting. Isansys is an innovative, continuous vital sign data acquisition, analysis, and prediction platform that combines wearable wireless sensors and networks with analytical algorithms and data analysis to provide low cost, continuous monitoring for patients. The technology can be used either in a hospital setting or at home. This technology was pioneered with the assistance of clinicians and hospitals as an innovative and unobtrusive new patient monitoring technology with predictive care methodologies to improve patient outcomes and reduce cost. The Oxfordshire-based company received a Small Business Research Initiative (SBRI) grant to increase the functionality and extend the intended use of its innovative Patient Status Engine (PSE). Hospitals in England and India then participated in early trials, and it is currently in use in many countries throughout the world but has not gained widespread adoption in the United States. PSE provides a continuous vital sign data acquisition, analysis and prediction platform that is helping hospitals and healthcare organizations move into the next generation of digital, data-driven patient care (Hortin, 2015).

As Business Operations Manager at Ashley Regional Medical Center, prepare and attach to the relevant discussion board area a narrated PowerPoint presentation of no more than 8 slides using concepts introduced in this Module to update the Medical Centers Technology Adoption Board regarding the reliability of NPV estimates. Your presentation must:

1. Evaluate the possibility that forecasted values could differ from the initial NPV estimate, explaining the assumptions and conceptual rationale behind the analyses that you have used to diminish the possibility of error in our estimates, including sensitivity and scenario analyses. Present additional insights to the risk associated with project return that capital market history can offer regarding risk and return associated with this project.

In investigating adoption of this technology as Business Operations Manager at Ashley Regional Medical Center, you have estimated the projects NPV to be positive at a discount rate of 18%, based on projected cash flows. However, you recognize the possibility of error in these cash flow projections, and you wish to alert decision-makers as to the impact of different assumptions about the future, on these estimates. You intend to present these findings to the Medical Centers Technology Adoption Board, a group of medical professionals that is most likely unfamiliar with this variety of analysis. As such, while you intend to include a discussion of sensitivity and scenario analyses alongside your estimates, you understand that you will have to put some attention into introducing sensitivity and scenario analysis prior to delivering this judgment.

Working capital needs will begin at $20,000, and will be 10% of

revenues thereafter, while an initial investment of $800,000 (the price of the Isansys unit) will be

required. You have developed the following base estimate of essential data, and will assume that the

Isansys system will be depreciated on a MACRS 7-year basis:

Base Case
Unit Sales	$7,200
Price per Unit	1,800
Variable costs per unit	1,200
Fixed costs per year	$400,000

Table 1. Base Case

In the base case given, using a discount rate of 28%, a discounted cash flow would appear as follows:

	Year 0	Year 1	Year 2	Year 3
Sales	-	$12,960,000	$16,848,000	$9,072,000
Variable	-	8,640,000	11,232,000	6,048,000
Fixed	-	400,000	400,000	400,000
Depreciation	-	$114,320	$195,920	$489,760
EBIT	-	3,805,680.000	5,020,080.000	2,134,240.000
Taxes (34%)	-	1,293,931.200	1,706,827.200	725,641.600
Net Income	-	2,511,748.800	3,313,252.800	1,408,598.400
1.28	-	1.28	1.64	2.10
NPV	-	1,962,304	2,022,249	671,672

Table 2. Calculation of NPV of EBIT, for use in computing Operating Cash Flow, Base Case

I. Operating Cash Flow
Operating Cash Flow	Year 0	Year 1	Year 2	Year 3
EBIT	-	$3,805,680.00	$5,020,080.00	$2,134,240.00
Deprec	-	57,160	57,161	57,162
Taxes	-	1,293,931	1,706,827	725,642
Operating Cash Flow	-	2,568,909	3,370,414	1,465,760
1.28	-	1.28	1.64	2.10
Base Case NPV	-	$2,006,960.00	$2,057,137.33	$698,929.02
II. Working Capital
Initial NWC	(20,000)	-	-	-
Change in NWC	-	1,296,000	1,684,800	907,200

NWC Recovery	-	-	-	757,600
Total Change in NWC	(20,000)	(1,276,000)	(388,800)	777,600
III. Capital Spending
Initial Outlay	(800,000)	-	-	-
Aftertax Salvage	-	-	-	349,840
Total Capital Spending	(800,000)	-	-	349,840

Table 3. Components of Operating Cash Flow, Base Case

	Year 0	Year 1	Year 2	Year 3
Operating Cash Flow	-	2,006,960	2,057,137	698,929
Changes in NWC	(20,000)	(1,276,000)	(388,800)	777,600
Capital Spending	(800,000)	0	0	349,840
Total Project Cash Flow	(820,000)	730,960	1,668,337	1,826,369
Cumulative Cash Flow	(820,000)	(89,040)	1,579,297	3,405,666
1.28%	1.00	1.28	1.64	2.10
Discounted Cash Flow	(820,000)	(69,562)	963,926	1,623,948

Table 4. Discounted Cash Flow, Base Case