Operating profit EBIT Non current assets Non current liabilities Interest

Operating profit ebit non current assets non current

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Operating profit (EBIT) Non-current assets Non-current liabilities Interest, finance costs Property, plant & equipment Loans, debt, leases due after 1 year Profit before tax Investment property Retirement benefit obligation COST OF DEBT Income tax Goodwill Deferred tax liabilities Net profit after tax Total non-current liabilities Dividends K-WACC Reinvested in the business Stockholder's equity (Net worth) Preferred stock OPERATING LEVERAGE Common stock COST OF EQUITY Additional paid-in-capital FINANCIAL LEVERAGE Retained earnings VALUATION CASH FLOW Total assets Total liabilities & equity COST OF CAPITAL
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ANALYSIS STEPS: FINANCING 1-HISTORICAL RATIOS 2-K-WACC HISTORICAL RATIOS I/S & B/S FORECAST EFN 3-CAPITAL BUDGETING LONG-FORM FORECAST I/S, B/S, & RATIOS 5-EQUITY VALUATION 6-FINANCING CAPITAL BUDGETING OP & CAP NATCF, NPV, IRR, PAYBACK VALUATION ENTERPRISE VALUE USING FREE CASH FLOW MARKET MULTIPLES: P/E, MV/BV, REV, EBIT 4-FORECAST & EFN
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DEBT EQUITY DEBT EQUITY EBIT CHART income risk control mktblty flexblty timing K-WACC
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UNIVERSITY OF VIRGINIA MEDICAL CENTER Long Term Acute Care Hospital Free Cash Flow Projections Revenue and Cost Assumptions Results-No NWC Recov Number of Beds 50 NPV $5,687 Year 1 Utilization 26% IRR 17.6% Year 2 Utilization 60% Annual Increase in Utilization 4% Operating Expense (% of Revenue) 7.0% K-wacc 10% Year 1 VOLUME Patient Day Capacity 18,250 Utilization 26% Patient Days Used 4,745 Average Patient Census per Day 13 Average Length of Stay 30 Number of Patients per Year 158 Full-Time Employees/Census 4.8 Full-Time Employees 62 INSURANCE PAYER Patient Mix Medicare 36% 57 Medicaid 29% 46 Commercial Payers 24% 38 Other 9% 14 Indigent 2% 3 158 Billing Annual Incr Medicare—bill per patient $27,795 0.0% 1,583 Medicaid—bill per patient $35,000 1.3% 1,605 Commercial Payers—bill per day $2,800 5.0% 3,189 Other—bill per patient $38,500 1.3% 548 Indigent—bill per patient $35,000 1.3% 111 Total Revenue (000 omitted) 7,035 Less Uncollectable 1% 70 Total Net Revenue (000 omitted) 6,965 EXPENSES Annual Incr Salary, Wage, Benefits (based on $ per employe $60,250 3% 3,760 Supplies, Drugs, Food (% net revenue) 16.3% 1,135 Management Fees (% net rev) 8% 557
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Operating Expenses (fixed + 7 % net rev) $1,200,000 NA 1,688 Land Lease per year $200,000 3% 200 Depreciation (straight line 30yrs) $15,000,000 500 Total Expenses (000 omitted) 7,840 Total Expenses 7,840 Operating Profit (804) Operating Margin -11.4% Net Working Capital Notes: Accounts Receivable 30 days 572 Inventory Supplies, Drugs, Food 60 days 187 Accounts Payable 30 days 93 Net Working Capital 666 Change in NWC 666 Free Cash Flows Calculation Operating Profit (804) Add Depreciation 500 Less Capital Expenditures (7,500) (7,500) Less Increase in Net Working Capital (666) Free Cash Flows (000 omitted) (7,500) (8,470) NPV (no recovery in year 10) $5,687 (000 ommited) IRR (no recovery in year 10) 17.6% Year 1 NWC Recovery 0 Sale of Facility at Book Value 0 NPV with Year 10 Recovery $10,425 (000 omm (7,500) (8,470) IRR with Year 10 Recovery 21.2% Net Profit (Operating Profit - Interest) (000 ommited) (2,004) Net Profit/Net Revenue -28.8% Study the above analysis carefully, examining the inputs, outputs, and formulas u
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Q1a Mulroney did not use working capital cash flows in her original analysis. The analysis ab includes incremental investment in working capital. Discuss why she was either correct o
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