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Question Two Winfield Hospital Trust (the Trust) offers private medical services in addition to its NHS work. In relation to its private patients, the Trust

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Question Two Winfield Hospital Trust (the Trust) offers private medical services in addition to its NHS work. In relation to its private patients, the Trust is considering the following options: 1. Offering a discount to its receivables in the next financial year as a way of speeding up debt collection from private patients. Estimated sales for the year are 2 million and average receivables are expected to be 430,000. Private patients are currently offered 30-day credit terms. The Trust is considering offering a 2.5% discount for payment within 20 days and has estimated that 50% of customers (by value) will take advantage of this, with the remaining 50% of customers not expected to change their current paying behaviour. The cost of finance for the Trust is 8% per annum. Assume a 365 day year. 2. The Trust could remove the offer of credit to private patients altogether, instead requiring up-front payments before any services are provided. equired: (a) Evaluate whether it is financially worthwhile for the Trust to offer the proposed discount (option 1). (6 marks) (b) Discuss the key considerations that the Trust should consider before deciding about option 2. No calculations are required. (4 marks)

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