Question
The Hyde Park Surgery Center specializes in high-risk cardiovascular surgery. The center needs to forecast its profitability over the next 3 years to plan for
The Hyde Park Surgery Center specializes in high-risk cardiovascular surgery. The center needs to forecast its profitability over the next 3 years to plan for capital growth projects. By collecting historical data, the chief of staff is able to determine that the number of patients in the first year is expected to be uniformly distributed between 600 and 700; the annual growth rate for each subsequent year is triangular with parameters (5%, 8% 9%), and the growth rate for year 2 is independent of the growth rate for year 3. Expected billing per patient in year 1 is normal with mean of $145,000 and standard deviation of $10,000 and it is expected to grow yearly by 5%. However, because of managed care, the center collects only 35% of billings. Variable costs for supplies and drugs are calculated to be 12% of billings. Fixed costs for salaries, utilities etc. will amount to $20,000,000 in the first year and are assumed to increase at a rate that follows a uniform distribution between 5% and 7% and independent of other years. Use a discount rate of 7% and find the distribution of the NPV of profit over the 3-year horizon. Question is to be solved in Excel
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