You are also required to respond to your classmates. Remember, a quality post is not a simple "I agree" or 1-sentence response. Your responses to your classmates should be at least a paragraph and should be based upon your experiences or the unit readings and/or class materials. If you need more clarification about quality posts, please ask your instructor.
The Ocean View Diabetes Clinic is considering implementation of a tele-health diabetes unit. This will allow clinicians to monitor the care of the patient from the patient's home through the use of high-tech equipment. The pilot project will consist of two test patients. This will be a very costly project. The Ocean View Diabetes Clinic needs to know how long it will take the revenue generated from investing in this tele-health diabetes unit to equal the dollars spent to implement this pilot project.
The assumptions are as follows:
Cost of the equipment: $500,000
Longevity of the equipment: 20 years
Revenue the new unit will generate: $225,000
Operating costs related to earned revenue: $150,000
Annual depreciation: $25,000
Given the assumptions above, determine the computation method that will be most beneficial to the manager in evaluating the use of the organization's money. In other words, is present value analysis the best method in the scenario?
Discuss the following:
Explain why your selection is the best method as opposed to the other methods, used to evaluate the use of money. You must have an understanding of the various methods used to evaluate the use of money (unadjusted rate of return, present value analysis, internal rate of return, and payback period).
Describe your understanding of the four basic financial statements (balance sheet, statement of revenue and expense, statement of changes in fund balance/net worth, and statement of cash flows) by doing the following:
Explain the importance of reporting within a health care organization.
Identify one of the four major reports used when reporting the organization's finances.
Describe why you think the financial statement you chose outlines information that is deemed most valuable to the company.