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5. Perform sensitivity analysis by creating a series of DCF analysis changing the following parameters: a. Reimbursement growth rate - Include -1%, 2%, and 5%. b. Inpatient Hospital effect on profits - $300,000 and $700,000 c. Procedures per year - 2000 and 2600 d. 2030 salvage value - $7 million. Export images Assumptions: Procedures per year Current avg net reimbursement per procedure Annual rate of change for reimbursment Discount rate Fixed cost Annual inflation rate Variable cost Impact on hospital Years 2027 2028 Procedures per year Avg reimbursement rate Net reimbursements/ Incremental Revenue Fixed cost Variable cost Depreciation Net effect on inpatient profits Total Expenses Operating profit/ Net Cash Flow - Capital expenditure Free cash flow Net present value (NPV) Assumptions: Procedures per year Current avg net reimbursement per procedure Annual rate of change for reimbu ment Fixed cost Annual inflation rate Variable cost --!! Variable cost Depreciation Net effect on inpatient profits Total Expenses Operating profit/ Net Cash Flow - Capital expenditure Free cash flow Net present value (NPV) Assumptions: Procedures per year Current avg net reimbursement per procedure Annual rate of change for reimbursment Fixed cost Annual inflation rate Variable cost Impact on hospital Years 2029 2030 Procedures per year Avg reimbursement rate Net reimbursements/ Incremental Revenue Fixed cost Variable cost Depreciation Net effect on inpatient profits Total Expenses Operating profit/ Net Cash Flow - Capital expenditure Free cash flow Net present value (NPV) Title Page Exhibit 2 Exhibit 3 DCF Model ... A B D E F G . 1 1 TEX Lit 2 2 Caravash Community Hospital 3 Financial Data on Comparable Companies (financial statement data from 2018) 4 5 Tenet Healthcare 6 Description: Operates 475 outpatient centers, 255 ambulatory surgery centers, 68 hospitals, 23 surgical hospitals, 36 7 8 Revenue $18.3 billion 9 Enterprise value $21.4 billion 10 Market equity value $6.8 billion 11 Total debt $14.6 billion 12 Operating margin 11.0% 13 Return on assets 5.5% 14 Beta 0.75 15 Bond rating Ba 16 17 Surgery Partners 18 Description: Operates 108 ambulatory surgical centers and 15 surgical hospitals in 31 states. 19 20 Revenue $1.8 billion 21 Enterprise value $4.7 billion 22 Market equity value $2.4 billion 23 Total debt $2.3 billion 24 Operating margin 14.7% 25 Return on assets 3.5% 26 Beta 0.80 27 Bond rating B 28 29 Sources: Descriptions and company data are from Yahoo! Finance; bond ratings are from Moody's; Beta estimates are by 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 A B D 1 Exhibit 3 2 Calabash Community Hospital 3 Capital Markets Information (December 2019) 4. 5 6 10-Year Government Bond Yields 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Australia Brazil Canada France Germany Hong Kong India Italy Japan Mexico South Korea United Kingdom United States 1.19% 6.82% 1.44% -0.05% -0.35% 1.47% 6.47% 1.28% -0.04% 7.12% 1.71% 0.67% 1.72% 21 22 23 24 25 US Corporate Bond Yields 26 2.32% 27 A 2.81% 28 Baa 3.42% 29 Ba 4.32% 30 B 5.55% 31 32 Note: The bond rating represented the creditworthiness of the bo Title Page Exhibit 2 Exhibit 3 DCF Model A B D E F G H 11 France -0.05% 12 Germany -0.35% 13 Hong Kong 1.47% 14 India 6.47% 15 Italy 1.28% 16 Japan -0.04% 17 Mexico 7.12% 18 South Korea 1.71% 19 United Kingdom 0.67% 20 United States 1.72% 21 22 23 24 25 US Corporate Bond Yields 26 2.32% 27 2.81% 28 Baa 3.42% 29 Ba 4.32% 30 B 5.55% 31 32 Note: The bond rating represented the creditworthiness of the borrower, with an "Aa" rating indicating a borrower with a v 33 34 Sources: Government bond yields are from Bloomberg.com (markets/rates-bonds) on December 3, 2019. The corporate 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 5. Perform sensitivity analysis by creating a series of DCF analysis changing the following parameters: a. Reimbursement growth rate - Include -1%, 2%, and 5%. b. Inpatient Hospital effect on profits - $300,000 and $700,000 c. Procedures per year - 2000 and 2600 d. 2030 salvage value - $7 million. Export images Assumptions: Procedures per year Current avg net reimbursement per procedure Annual rate of change for reimbursment Discount rate Fixed cost Annual inflation rate Variable cost Impact on hospital Years 2027 2028 Procedures per year Avg reimbursement rate Net reimbursements/ Incremental Revenue Fixed cost Variable cost Depreciation Net effect on inpatient profits Total Expenses Operating profit/ Net Cash Flow - Capital expenditure Free cash flow Net present value (NPV) Assumptions: Procedures per year Current avg net reimbursement per procedure Annual rate of change for reimbu ment Fixed cost Annual inflation rate Variable cost --!! Variable cost Depreciation Net effect on inpatient profits Total Expenses Operating profit/ Net Cash Flow - Capital expenditure Free cash flow Net present value (NPV) Assumptions: Procedures per year Current avg net reimbursement per procedure Annual rate of change for reimbursment Fixed cost Annual inflation rate Variable cost Impact on hospital Years 2029 2030 Procedures per year Avg reimbursement rate Net reimbursements/ Incremental Revenue Fixed cost Variable cost Depreciation Net effect on inpatient profits Total Expenses Operating profit/ Net Cash Flow - Capital expenditure Free cash flow Net present value (NPV) Title Page Exhibit 2 Exhibit 3 DCF Model ... A B D E F G . 1 1 TEX Lit 2 2 Caravash Community Hospital 3 Financial Data on Comparable Companies (financial statement data from 2018) 4 5 Tenet Healthcare 6 Description: Operates 475 outpatient centers, 255 ambulatory surgery centers, 68 hospitals, 23 surgical hospitals, 36 7 8 Revenue $18.3 billion 9 Enterprise value $21.4 billion 10 Market equity value $6.8 billion 11 Total debt $14.6 billion 12 Operating margin 11.0% 13 Return on assets 5.5% 14 Beta 0.75 15 Bond rating Ba 16 17 Surgery Partners 18 Description: Operates 108 ambulatory surgical centers and 15 surgical hospitals in 31 states. 19 20 Revenue $1.8 billion 21 Enterprise value $4.7 billion 22 Market equity value $2.4 billion 23 Total debt $2.3 billion 24 Operating margin 14.7% 25 Return on assets 3.5% 26 Beta 0.80 27 Bond rating B 28 29 Sources: Descriptions and company data are from Yahoo! Finance; bond ratings are from Moody's; Beta estimates are by 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 A B D 1 Exhibit 3 2 Calabash Community Hospital 3 Capital Markets Information (December 2019) 4. 5 6 10-Year Government Bond Yields 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Australia Brazil Canada France Germany Hong Kong India Italy Japan Mexico South Korea United Kingdom United States 1.19% 6.82% 1.44% -0.05% -0.35% 1.47% 6.47% 1.28% -0.04% 7.12% 1.71% 0.67% 1.72% 21 22 23 24 25 US Corporate Bond Yields 26 2.32% 27 A 2.81% 28 Baa 3.42% 29 Ba 4.32% 30 B 5.55% 31 32 Note: The bond rating represented the creditworthiness of the bo Title Page Exhibit 2 Exhibit 3 DCF Model A B D E F G H 11 France -0.05% 12 Germany -0.35% 13 Hong Kong 1.47% 14 India 6.47% 15 Italy 1.28% 16 Japan -0.04% 17 Mexico 7.12% 18 South Korea 1.71% 19 United Kingdom 0.67% 20 United States 1.72% 21 22 23 24 25 US Corporate Bond Yields 26 2.32% 27 2.81% 28 Baa 3.42% 29 Ba 4.32% 30 B 5.55% 31 32 Note: The bond rating represented the creditworthiness of the borrower, with an "Aa" rating indicating a borrower with a v 33 34 Sources: Government bond yields are from Bloomberg.com (markets/rates-bonds) on December 3, 2019. The corporate 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68