Healthcare Finance
Instructions
You will be submitting a recommendation on whether or not a new MRI machine is feasible. You will include both a detailed report that highlights some of the keys benefits and a cash flow analysis for the MRI machine. Part II of this assignment requires that you create a detailed recommendation, using the cash flow you created as a reference, of whether or not the facility should or should not buy a MRI. To present your analysis, the physician's network has asked you to prepare a report. This report will be in two parts. The first section will be a written report (in essay format) that includes an introduction of what will be included in the report, a detailed summary of the cash flow analysis, and a determination by you as to whether you recommend that the new MRI services to be a sound financial decision. For the report to be effective, it should be no less than five pages total, including references.
Keep in mind, a majority of this information comes from directly from your cash flow analysis as you just need to summarize it. What are the significant figures? What year will the facility break even? What year will the facility make a profit? How did you get these numbers? Finally, in your final paragraph you will state your recommendation, based on this analysis. Remember, your cash flow analysis is your reference for this recommendation.
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Cash Revenue and Costs
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0
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1
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2
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3
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4
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5
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1. System Cost
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($2,000,000)
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2. Installation Expenses
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($500,000)
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3. Total Cost
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($2,500,000)
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4. Net Revenues
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$1,012,500
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$1,012,500
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$1,012,500
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$1,012,500
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$1,012,500
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5. Labor Costs
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($140,000)
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($140,000)
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($140,000)
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($140,000)
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($140,000)
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6. Maintenance Cost
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($125,000)
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($125,000)
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($125,000)
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($125,000)
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($125,000)
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7. Supplies
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($54,000)
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($54,000)
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($54,000)
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($54,000)
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($54,000)
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8. Net Operating Income
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$693,500
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$693,500
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$693,500
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$693,500
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$693,500
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9. Salvage Value
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$750,000
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10. Net Cash Flow
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($2,500,000)
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$693,500
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$693,500
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$693,500
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$693,500
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$1,443,500
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Assignment Requirements
Report Includes Introduction
Report includes detailed summary of the cash flow analysis
Report includes a decision summary (recommendation or declination) based off of the cash flow analysis
Report includes a conclusion paragraph summarizing the written portion
Suggested Outline
Paragraph 1-2: Introduce the report. What are you going to be covering? Who is the report addressed to?
Paragraph 3-4: A detailed summary of cash flow analysis. What figures stood out to you? What figures do they need to aware of? You need to inform the reader what the numbers on your analysis mean.
Paragraph 5-6: Your recommendation. Please do not simply say "Yes, this is a great investment." Explain why. What is the profit margin and when will the company first see a profit?
Consider using the following resources to help you get started:
http://www.investopedia.com/articles/stocks/07/easycashflow.asp - This article describes how to analyze a cash flow analysis
https://www.sba.gov/content/develop-cash-flow-analysis-your-business This article discusses developing a cash flow analysis
http://www.expectationsinvesting.com/tutorial8.shtml - This article discusses the Cost of Capital.