Question 5

a. Are taxes relatively important in determining the value of Sooner Clinics?

b. Suppose the Year 6+ revenue growth rate could be as low as 1 percent and as high as 3 percent. Is the 6+ revenue growth rate relatively crucial in determining the value of Sooner Clinics?

does this make sense?

Taxes are important for determining the value of Sooner Clinic because they will be included in the discounted cash flow valuation. For instance, an acquirer with a significant growth rate is far more likely to obtain Sooner Clinics because he or she has a relatively high value when compared to those with a lower rate of growth. Different tax rates can be entered to see how they affect discounted cash flow valuation. A not-for-profit or low-tax-rate acquirer's DCF value will vary from $4.3 million to $5.8 million, while a higher-tax-rate acquirer's DCF value will range from $2.8 million to $4.2 million. Sensitivity to tax rate FCFE method Value $5,302,36 $4.823,01 3 $4,341,483 $3.857.766 $3,371,854 $2,893.739 3 Market multiple Value: : Physician FTES $4,945.45 5 $4.945,455 $4.945,455 $4,945,455 $4945,455 $4.945.455 $4,945,45 5 Net Patient revenue $3,798,54 2 $3,798,54 2 $3.798,542 $3,798,542 $3,798,542 $3,798,542 EBITDA $4,369,28 4 $4,369,28 4 $4,369,284 $4,369,284 $4,369,284 $4,369,284 Sensitivity to year 6+ Revenue Growth Rate 1% 2% 3% FOCF method value $4.434,358 $4,718,661 $5,062,069 FCFE method Value $4,136,817 $4,341,483 $4,583,362 Market multiple Value: Physician FTES $4.945,455 $4,945,455 $4,945,455 Net Patient revenue $3,798,542 $3,798,542 $3,798,542 EBITDA $4,369,284 $4,369,284 $4,369,284 This is due to the fact that the predicted growth rate is smaller, at 2%, and the values are similar. The DCF would fluctuate more if the rate was higher. SOURCES CITED: Gapenski, L. C. (2016). Halthcare finance: An introduction to accounting & financial management. Chicago, IL: Health Administration Press. Taxes are important for determining the value of Sooner Clinic because they will be included in the discounted cash flow valuation. For instance, an acquirer with a significant growth rate is far more likely to obtain Sooner Clinics because he or she has a relatively high value when compared to those with a lower rate of growth. Different tax rates can be entered to see how they affect discounted cash flow valuation. A not-for-profit or low-tax-rate acquirer's DCF value will vary from $4.3 million to $5.8 million, while a higher-tax-rate acquirer's DCF value will range from $2.8 million to $4.2 million. Sensitivity to tax rate FCFE method Value $5,302,36 $4.823,01 3 $4,341,483 $3.857.766 $3,371,854 $2,893.739 3 Market multiple Value: : Physician FTES $4,945.45 5 $4.945,455 $4.945,455 $4,945,455 $4945,455 $4.945.455 $4,945,45 5 Net Patient revenue $3,798,54 2 $3,798,54 2 $3.798,542 $3,798,542 $3,798,542 $3,798,542 EBITDA $4,369,28 4 $4,369,28 4 $4,369,284 $4,369,284 $4,369,284 $4,369,284 Sensitivity to year 6+ Revenue Growth Rate 1% 2% 3% FOCF method value $4.434,358 $4,718,661 $5,062,069 FCFE method Value $4,136,817 $4,341,483 $4,583,362 Market multiple Value: Physician FTES $4.945,455 $4,945,455 $4,945,455 Net Patient revenue $3,798,542 $3,798,542 $3,798,542 EBITDA $4,369,284 $4,369,284 $4,369,284 This is due to the fact that the predicted growth rate is smaller, at 2%, and the values are similar. The DCF would fluctuate more if the rate was higher. SOURCES CITED: Gapenski, L. C. (2016). Halthcare finance: An introduction to accounting & financial management. Chicago, IL: Health Administration Press