"The Case for Open Heart Surgery at Cabarrus" evaluate financial capabilities

Anonymous
timer Asked: Jul 21st, 2017
account_balance_wallet $70

Question Description

This case brings capital budgeting into the strategic assessment. DCF, NPV, and IRR calculations are to be made in assessing the merits of the proposed action. Students must assess risk, determine  and defend a discount rate, estimate future cash flows, consider the time value of money, and consider these factors in their recommendation(s).

Here is a link to the case: http://www.wiley.com/legacy/wileychi/ginter/supp/Case_19.pdf


Simply need financial numbers/calculations as mentioned above. I already have the rest of the paper written 

Tutor Answer

wambuiguama
School: New York University

Hello! I have uploaded the answer to this question. I completed the financial numbers/calculations that you, specifically, requested for. I have also attached the Excel workbook for calculation. Please have a look at the answer that I have posed below and get back to me in case of anything. Thank you.

Running Head: CMH OPEN HEART SURGERY CASE STUDY

CMH Open Heart Surgery Case Study
Name
Institution
Date

1

CMH OPEN HEART SURGERY CASE STUDY

2

CMH Open Heart Surgery Case Study
Computation of projected three-year revenues
Charge for each open heart surgery

$40,957

Number of open heart surgery procedures
Projected revenue

Year 1

Year 2

Year 3

53.00

106.00

211.00

$2,170,721

$4,341,442

$8,641,927

Year 1

Year 2

Year 3

$2,170,721

$4,341,442

$8,641,927

Calculation of projected cash flows

Projected revenue
Less direct costs

($2,364,214) ($3,217,739) ($5,438,392)

Less indirect cost
Add back depreciation
Estimated cash flows

($503,650)

($597,071)

($800,740)

$245,412

$245,778

$246,211

($451,731)

$772,410

$2,649,006

Determination of DCF, NPV, and IRR
Initial capital outlay
Discount rate

$3,273,180
12%
Year 0

Year 1

Year 2

Year 3

Projected cash flow

($3,273,180)

($451,731)

$772,410

$2,649,006

DCF per year

($3,273,180)

($403,331)

$615,761

$1,885,548

CMH OPEN HEART SURGERY CASE STUDY
Total DCF

($1,175,203)

NPV

($1,049,322)

IRR

3

-14%

The discount rate chosen is 12% b...

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Review

Anonymous
Good stuff. Would use again.

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