Base case Scenario

Student VersionCopyright 2014 HealthAdministration PressCORAL BAY HOSPITALTraditional Project AnalysisThis case illustrates a complete capital budgeting analysis, including cash flow analysisand profitability measures. Note the model extends to Column I.The model consists of a complete base case analysisno changes need to be madeto the existing MODEL-GENERATED DATA section. However, all values in the studentversion INPUT DATA section have been replaced with zeros. Thus, students must determinethe appropriate input values and enter them into the model. These cells are colored red.When this is done, any error cells will be corrected and the base case solution will appear.Note that the student version does not contain any risk analyses, so students will have tocreate their own if required by the case. Furthermore, students must create their owngraphics (charts) as needed to present their results.INPUT DATA:KEY OUTPUT:Land initial costLand opportunity cost (and salvage value)Building/equipment costBuild/equipment salvage valueProcedures per dayAverage net patient revenue per procedureLabor costsUtilities costsIncremental overheadSupply cost ($/procedure)Inflation rate on net patient revenueInflation rate on costsTax rateRevenues lost from inpatient surgeriesReduction in inpatient surgery costsCost of capital$175,000$200,000$10,000,000$5,000,00020$1,000$918,000$50,000$61,000$2003.0%3.0%40.0%$1,000,000$500,00010.0%NPVIRRMIRRPaybackDeprec.Expense$2,000,0003,200,0001,900,0001,200,0001,100,000600,000$821,19012.7%11.7%4.1End of YearBook value$8,000,0004,800,0002,900,0001,700,000600,0000MODEL-GENERATED DATA:Depreciation Schedule:Year123456MACRSFactor0.200.320.190.120.110.06Net Cash Flows:Land opportunity costBuilding/equipment costNet patient revenue (including inpatient loss)Less: Labor costsCost savings on inpatientsUtilities costsSuppliesIncremental overheadDepreciationIncome before taxesTaxesProject net incomePlus: DepreciationPlus: Net land salvage valuePlus: Net building/equipment salvage valueProject Cash Flows0($200,000)(10,000,000)12345$4,000,000918,000(500,000)50,0001,000,00061,0002,000,000$471,000188,400$282,6002,000,000$4,120,000945,540(515,000)51,5001,030,00062,8303,200,000($654,870)(261,948)($392,922)3,200,000$4,243,600973,906(530,450)53,0451,060,90064,7151,900,000$721,484288,594$432,8901,900,000$4,370,9081,003,123(546,364)54,6361,092,72766,6561,200,000$1,500,128600,051$900,0771,200,000$4,502,0351,033,217(562,754)56,2751,125,50968,6561,100,000$1,681,132672,453$1,008,6791,100,000190,0003,240,000Net cash flow($10,200,000)$2,282,600$2,807,078$2,332,890$2,100,077$5,538,679Cumulative net cash flow(For payback calculation)($10,200,000)($7,917,400)($5,110,322)($2,777,432)($677,355)$4,861,325Profitability and Breakeven Measures:Net present value (NPV)Internal rate of return (IRR)Modified IRR (MIRR)$821,19012.7%11.7%Payback4.1ENDAssume all assumptions as stated in the Case (Base Case Scenario).Assume Coral’s cost of capital at 14%.Show all dollar figures in thousands of dollars with one decimal point.($ in 000.0)Include in your analysis the following:a. List all your assumptions (Base Case Scenario). ( 1 page)b. Include a spreadsheet showing Depreciation each year ( 1 page).c. Include a spreadsheet showing the Revenue model for next 5 years. ( 1 page).d. Projected income statements ( 5 years) for the surgery center. ( 1 page).e. Projected Cash Flows year-by-year. ( 1 page).f. Include decision parameters such as IRR, NPV & Pay-back period. ( 1 page)Using the "Best Case",as seen in the case# of procedures/dayAverage Revenue per procedureSalvage Value (after 5 years) -Bldg & Equip.All other assumptions are same as the Base Case Scenario.Calculate questions 1a to 1f assuming Best Case Scenario