Question: #1

Your firm reduces its days in receivables from 87 to 67, which generates $3.4 million of new investment funds. Growth rate in new equity will increase because: (please discuss the reason for your choice)

1.Total asset turnover will increase

2.Investment income will increase

3.Both A and B

2. Activity: You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budget data is presented below:

Budgeted procedures: 10,000

Budgeted cost $400,000

Desired profit $80,000

It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below:

Payer Volume% Discount %

Blue Cross 20 4

Unity PPO 15 10

Kaiser 10 10

Self-pay 5 40

50%

Question: #2 What rate must be set to generate the required $80,000 in profit in the preceding example?