State Home Health Care, Inc. (SHHC) supplies visiting nursing care statewide. They presently employ approximately 300 nurses who presently use laptop computers to record their nursing notes when visiting patients. The nurses are supervised by 20 nursing supervisors. It has been proposed that these be replaced with tablet computers and their software vendor has recently developed an app for tablet computers.
The present hardware is fully depreciated and the computers will be donated to a charitable organization. This organization has not qualified for 501-c-3 status so no tax deduction can be taken for the donation. The present software is owned but there is no salvage value or taxes associated with disposing of this present software
A financial analysis of adapting the tablet proposal is needed.
1. Assume 1 tablet per nurse and nursing supervisor.
The initial (year 0) costs are estimated as follows:
2. Tablet computers with case @ $500 each (one time)
3. Initial training and implementation will be contracted out at $100,000 in year 0
The annual costs (Years 1-3) can be determined from the following:
4. Software app licenses at $195 annually per tablet computer.
5. Office software is leased at $50,000 annually
6. Tablet computer maintenance contract annually @ $45
7. Wireless Telephone costs @ $300 monthly per tablet computer
8. The benefits have been estimated by the software vendor at a 20% reduction in cost per visit although no other implementations have been used long enough to verify this. SHHC has interpreted this to mean that the present 25 visits per week for each nurse will be increased to 30.
9. At present, each visit of a nurse earns SHHC an average of $20.50 (revenue - costs).
10. It is also expected to be able to reduce one clerical staff position at $35,000 annually.
11. Purchase, training and implementation is planned during the current year (2013) with benefits and annual costs to start in the coming year (2014).
12. SHHC last year paid income taxes at a rate of 22% and uses a MARR of 14% for proposal analyses.
13. The tablets would be depreciated using MACRS over 5 years. Since three years is expected to be the life of a tablet, a 3-year time span (2014-2016) for the analysis is to be used.
14. The purchase contract for the tablet computers includes a provision where the vendor will buy back the tablet computer at the end of three years for $60 each.
Prepare a proposal for management for the tablet proposal. Include alternative scenarios that offer information where the estimates have potential errors. Discuss any other quantitative or qualitative costs and benefits that may occur, but do not include them in the financial analysis.
The requirements is to prepare a proposal for potential investors. Please use excel for income statement and cash flow analysis.
1. Prepare an Income Statements and Cash Flow Analysis
2. Prepare other analyses that help to understand the potential (or lack of) that the situation offers. (See topics covered in week 10).
3. Prepare a MS Word (or pdf) document for management to evaluate the investment. Include any recommendations, opportunities, or concerns. It should contain the following (the page indications are guidelines, not absolute requirements):
a. Cover page (1 page)
b. Executive summary (1 page or less)
c. An introduction to the investment situation
d. Financial analysis
e. Conclusion/summary (1 page or less)