Exam 2 Practice Problems_1

Exam 2 Practice Problems_1 - Practice Problems Working...

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Practice Problems Working Capital Management, Time Value of Money and Capital Budgeting 1. Highpoint Partners, a physician group practice, currently buys blood drawing supplies from MedEquip, Corp. on credit terms of 2/10 net 40. If Highpoint Partners was able to negotiate credit terms with MedEquip, Corp., which of the following alternatives would decrease the annual cost of trade credit to Highpoint Partners? Assume a 360 day year. [Hint: Do not try to quantify the benefits associated with free trade credit. Focus only on the costly trade credit.] a. Terms of 4/10 net 40 b. Terms of 2/10 net 20 c. Terms of 2/15 net 40 d. Terms of 2/10 net 50 e. None of the above 2. Good Samaritan Hospital has annual net patient service revenues of $17,250,000. Forty-five percent of the hospital’s net patient service revenues are paid by Medicare, 20 percent by Medicaid, and 35 percent by commercial insurers. Medicare pays in 20 days, Medicaid pays in 60 days, and commercial insurers pay in 90 days. Assume a 360-day year for all parts of this problem. a. Calculate Good Samaritan’s average collection period. b.
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This note was uploaded on 02/24/2010 for the course HPM 340 taught by Professor Reiter during the Spring '10 term at UNC.

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Exam 2 Practice Problems_1 - Practice Problems Working...

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