The city of Calabash was the county seat of rural Babcock County, South Carolina, located on the Great Pee Dee River. The local economy had diversified from a largely agricultural basis to a center of various manufacturing, commerce, and transportation industries. The population age distribution was 32% under the ageof18,16%from18to24,27%from25to44,15%from45to64,and10%65yearsofageorolder. The median age was 25 years. The median household income in the city was $27,408, and the median income for a family was $43,915. About 26% of the households were below the poverty line, including 24% of people under 18 and 23% of those aged 65 or over. The acute health care needs of the Babcock County population of69,000 were largely served throughCCH, a locally owned, not-for-profit community hospital with 265 beds. The hospital also operated a home health agency, two urgent care facilities, a hospice service, and 18 local medical practices. There were no other hospital facilities in the county, but the local population did frequent other hospitals in the state, including the major research hospital 90 miles away in Columbia. The county population was fairly stable, with negligible recent historical or expected population growth. The Project methods. A recent report by Acumen Research andConsulting estimated that the global size of the market for ASCs was expected to grow from $133 billion in 2019 to $203 billion in 2026 (see Exhibit 1). potential ASC volume. The team found that roughly 40% of hospital surgeries would have qualified for outpatient procedures. This review suggested that an ASC at CCH could manage and expect about 2,500 procedures per year, except for the first year when it was likely the ASC could do only about half that. Some people believed that there would be a modest ongoing increase in ASC procedures over time after 2023. The analysis also showed that the historical procedures were fairly diverse across specialties, including strong volume Based on these discussions and the expected mix of procedures, the team estimated an average net reimbursement at $2,250per procedure at today's rates. Thisnumber was not expected to remain static, and there was considerable uncertainty around the expected changes depending on procedure mix, payer mix, and payer reimbursement policy. The hospital maintained some discretion on these elements. The team believed that over the next five years, the rate of increase for reimbursements, including general inflation, could conceivably be anywhere between -1% and +5% per year. As a base case, the team agreed that 1% per year increases were reasonable. in procedure throughput. Since land adjacent to the hospital was available, and approval was expected to be expedited, the team believed the ASC could be operational by January 2022. The incurred design and engineering expenditures had already amounted to $300,000. The additional capital expenditures were expected to total $9.5 million, including al construction costs and equipment acquisition. These expenditures would primarily occur over the year 2021. The team decided it was appropriate to model the cash flow effects for ten years through 2031, since the figures associated with operating the A S after that time seemed highly speculative. In 2031, the facility and land were considered to have a market value of $5 million. The current market value ofthe land to be used for the facility was $500,000. The team estimated that the ASC would increase fixed operating expenses for the hospital by $2 million in 2022. These costs, including al building-related and fixed labor-related costs, were expected to increase at an annual rate of 2 % after 2022. T h e variable costs were estimated to be 35% o f net reimbursements and included the supply costs associated with procedures as well as the variable labor component. In rough terms, the variable costs comprised staffing costs (50%), supply costs (30%), and facility cost (20%). Capital expenditure depreciation was not included in these cost estimates, and there was some debate about whether the full expenditure should be fully depreciated over 10 years or 20 years. Hospital policy was to use a straight-line depreciation approach.There was general awareness that the ASC would substantively affect activities at the existing inpatient hospital. Some of these effects would be positive, as hospital capacity shifted to more acute cases, or the hospital improved its reputation for being progressive. There were also negative effects, as the reimbursement rates provided for outpatient procedures were less than those provided for inpatient procedures. The net effect had been debated forcefully. Some argued that because ofthe uncertainty, it was foolhardy to consider any financial effect. When pushed, most analyses had the net financial effect as negative, with estimates being a netreduction in hospital operating profit of between $300,000 and $700,000 per year. The forgone profit amount was not expected to increase over time. There had been some discussion of how the product mix at the ASC would affect the hospital. One scenario that had been explored was shifting the ASC procedure mix to increase the average reimbursement rate to $2,500 per procedure. With this $250 per-procedure gain, the inpatient hospital was expected to lose an additional $300,000 in profit per year, as higher-end procedures shifted to the ASC. Reimbursements were anticipated to take 90 days to collect. Any inventory investment was assumed to be offset by credit from suppliers. asked, Tang had offered 7% as a reasonable discount rate for the analysis. Still, Scott had collected Whendata from the current financial market to provide justification of Tang's estimate. These data are included in Exhibits 2 and 3. Calabash Community Hospital Selections of November 2019 Research Report by Acumen Research Ambulatory Surgical and Emergency Centers Market by Services Type- Global IndustryAnalysis, Market Size, Opportunities, and Forecast, 2019-2026 and Consulting The global ambulatory surgical and emergency centers market is expected to grow at a CAGR of 6.2% over the forecast period 2019 to 2026 and market size is poised to reach US$ 203.1 billion by 2026. Ambulatory surgery and emergency centers are medical care facilities that provide same-day surgery care which alsoincludes consultation and diagnosis. It is a more convenient alternative to hospital based outpatient procedures. Various specialties serve in ambulatory surgery and emergency centersare ophthalmology, orthopedics, gastroenterology, plastic surgery, pain, gynecology, and many others. Physicians have taken the lead for the development of ambulatory service centers to improve patient care, quality, and cost-effectivity. First facility was opened in 1970 in the U.S. With the increasing burden on healthcare facilities, hospitals were facing several challengessuch as limited operating room, scheduling delays, and difficulties for obtaining new medical devices or equipment due to low hospital budgets, which is responsible for the development of ambulatory service centers.Market Dynamics According to the Ambulatory Surgery Center Association (ASCA), surgeries performed in ASs are around50.0% (more] economical than Hospital Outpatient Department (HOPD. Preventivetreatment and the significant cost reduction are anticipated to boost the utility of ASC in the coming years. Availability of funding for ambulatory healthcare facilities and supportive government initiatives are also anticipated to propel the market growth in the coming years. Technological advancements in minimally invasive surgeries and its growing demand due to increasing awareness and shorten hospital stay; thereby lowerexpenditure will drive the marketfurther during the forecast period. For instance, the development of endoscopy and laparoscopy hasreduced theneed for longer hospital stays. Governments across the world are investing more in primary healthcare facilities to provide accessible medical care and decrease the burden on hospitals. For instance, in February 2016, NHS introduced the reforms, which include the provision of enhanced funding to general physicians to ease the pressure on emergency and accident departments, boosted the prospects of Primary Healthcare Properties (PHP). Various business strategies undertaken by key operating players and investment firms are also anticipated to boost the market growth in coming years. These strategies include mergers and acquisitions, geographic expansion, and product launches. Recruiting new independent surgeons,..expanding the list of ASC-qualified procedures, and technological limitations are the major restraints of the ambulatory surgery and emergency centers market. Based on type ofservice, ambulatory surgical and emergency centers market categorized into orthopedics, ophthalmology, gastroenterology, plastic surgery, pain management or spinal injections, and others. Plastic surgery is anticipated to observe the fastest growth during the forecast period due to increasing awareness about safety of surgery and development in minimally invasive field. For instance, according to the American Society ofPlastic Surgeons (ASPS) published report, about two hundred fifty thousand more cosmetic procedures were performed in 2018 as compared to previous year. According to the ASPS, in 2018, more than 17.7 million minimally invasive and surgical procedures were performed in the U.S. The gastroenterology segment dominated the market in 2018 due to large number of surgical procedures across the world. Development in the field of colonoscopy and endoscopy and high demand ofprocedures due to rising gastrointestinal disorders are some of the factors responsible for the dominance of the gastroenterology segment in the market. North America dominated the global ambulatory surgical and emergency centers market in 2018 and is anticipated to North America dominated the global ambulatory surgical and emergency centers market in 2018 and is anticipated to observe its dominance during the forecast period. High awareness about ambulatory surgery centers, supportive government initiatives for quality and cost effective patient care, and availability of reimbursement for ambulatory surgery and emergency centers are the key factors for the dominance of the region. According to the Definitive Healthcare published data, there are more than 9,280 ambulatory surgery centers across the U.S. Easy access to these facilities due to wide range of network is also expected to boost the market growth.Calabash Community Hospital Capital Markets Information (December 2019) 10-Year Government Bond Yields Australia 1.19% Brazil 6.82% Canada 1.44% France -0.05% Germany -0.35% Hong Kong 1.47% India 6.47% Italy 1.28% Japan -0.04% Mexico 7.12% South Korea 1.71% United Kingdom 0.67% United States 1.72% US Corporate Bond Yields Aa 2.32% A 2.81% Baa 3.42% Ba 4.32% B 5.55% find these inputs and calculate the WACC a) What is the appropriate WACC for the project? Justify your answer using quantitative data found in the case/exhibits. Is the cost of capital of 7% provided by the CFO a good estimate?please make sure you justify each component of the formula and let me know why you chose or assumed the data. and why the wacc is a good estimate and why you choose the formula you choose ensure to adress the whys