Question 1
The following are the selected entries for Lehman Hospital for December 31, 2015 and 2014. Create Lehman Hospital's Balance Sheet.
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2015
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2014
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Bonds Payable
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$64,000,000
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$65,000,000
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Current Assets
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21,000,000
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18,000,000
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Current Liabilities
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17,000,000
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14,000,000
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Property, Plant and Equipment
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64,000,000
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63,000,000
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Net Assets (Equity)
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4,000,000
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2,000,000
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Lehman Hospital
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Balance Sheet
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December 31, 2015
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2015
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2014
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Assets
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$
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$
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Total Assets
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$
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$
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Liabilities & net assets (equity)
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Liabilities
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$
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$
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Total Liabilities
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$
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$
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(Net assets) equity
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Total Liabilities and net assets (equity)
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$
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$
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Question 2
Using the data from your balance sheet and the following income statementanswer the following
| Lehman Hospital |
| Income Statement |
| For Year Ended December 31, 2015 |
| Revenues |
$96,000,000 |
| Expenses |
94,000,000 |
| Net Income |
$2,000,000 |
questions (5 points each).
Answer
(a) Compute the total profit margin ratio for 2015. Is this good if the industry average is 2.5
(b) Compute the return on assets ratio for 2015. Is this good if the industry average is 8.3%?
Note: To find total assets (in profit margin formula) to compare to the industry average, the total assets average must be calculated for both years, therefore (2015 assets+2014 assets)/2 = total assets.
(c) Compute the return on equity ratio for 2015. Is this good if the industry average is 5 percent?
Note: To find total equity (in return on equity formula) to compare to the industry average, the total equity average must be calculated for both years, therefore (2015 equity+2014 equity)/2 = total equity.
Question 3
Given the following data, complete the Cash Flow Analysis for Lehman Hospital:
Lehman Hospital is considering the purchase of a new MRI machine, which costs $3,000,000, with no salvage value and an expected life of five years. The MRI machine is expected to have fixed operating costs of $350,000 per year and variable operating costs of $10 per procedure. The equipment is expected to be used 20 times per day for 300 days a year, for each year of the life of the machine. The average billing price for one procedure is $100. All costs and revenues are expected to increase at a 5 percent inflation rate after the first year. The corporate cost of capital is 10%.
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(a)
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Year
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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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Equipment Cost
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Net Revenues
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Fixed Operating Costs
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Variable Operating Costs
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Net Operating Income
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Equipment Salvage Value
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Net Cash Flow
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NPV manual calculation.
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Corporate Cost of Capital
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NPV
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IRR
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(b) What is the payback period for the project using the following timeline?
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Year
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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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Annual Cash Flows
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Cumulative Cash Flows
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Payback
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?
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Payback Calculation
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Bonus Questions
(1) Using problem 12.3 (p. 385) of the text, create your own financial statement by changing the values for each section and solving.
(2) Recreate any problem from this course of your choosing. Please note the Chapter and formula that you are using to calculate your answer.