Healthcare Financial Management and Economics
Assignment-Capital Budgeting
There are many options to buy capital, including cash purchases, loans, leasing, and other forms of payment. Your goal as a healthcare manager is to determine which method is best for your organization, given its financial and organizational structure (i.e., for-profit or not-for-profit). Time value of money and net present value are two techniques that may help you determine how and when to invest in new capital. For this Assignment, you examine these concepts as they pertain to the healthcare industry.
To prepare for this Assignment:
Review this week's Learning Resources. Reflect on concepts of time value of money, net present value, internal rate of return, and purchasing options.
The Assignment:
Answer the following questions:
1. If a physician deposits $24,000 today into a mutual fund that is expected to grow at an annual rate of 8%, what will be the value of this investment:
a. 3 years from now
b. 6 years from now
c. 9 years from now
d. 12 years from now
2. The Chief Financial Officer of a hospital needs to determine the present value of $120,000 investment received at the end of year 5. What is the present value if the discount rate is:
a. 3%
b. 6%
c. 9%
d. 12%
3. The Forbes OBGYN group purchased a new diagnostic machine for their office for $900,000. The expected cash flows for each year of the five year period is $120,000, $155,000, $186,000, $208,000, and $225,000 for the five years. What is the internal rate of return or the IRR for the project?
4. Determine the Net Present Value for Problem 3 with an interest rate of 10%. Do you proceed or not with the project?
5. Determine the Payback Period for Problem 3.
Assignment part-2.
As a health care administrator, you will undoubtedly be faced with the responsibility of making decisions that may be impacted by ethics. Sometimes, the best approach to a given situation is clear, whereas others require you to carefully consider laws, regulations, and the impact of potential outcomes. How do you ensure you will make the best decision for your health care organization? For this Discussion, you examine the following scenario and consider whether there is a breach of ethics.
Scenario: An organization is developing a business plan. The intent of the organization is to provide a service for a community in need, but it appears they might have trouble obtaining financing. The board is trying to decide whether to be transparent in their financials or over-predict so they can properly finance their venture.
To prepare for this Discussion:
• Read the provided scenario.
• Given the mission of the organization in the scenario, consider whether over-predicting financials would be a breach of ethics.
Evaluate whether overstating financials would be a breach of ethics for the organization in the scenario. Why or why not? You are required to answer in 250 words.