1. Compare the stand-alone risk / return of each of the five investment alternatives listed in Exhibit 13.1.
Economic State
Poor
Below Avg
Avg
Above Avg
Excellent
Probability
1-Yr T-bill
0.1
0.2
0.4
0.2
0.1
Standard deviation
Return
CV
Project A
7.00%
7.0
CASE 20
7/17/2017
CORAL BAY HOSPITAL
Traditional Project Analysis
This case illustrates a complete capital budgeting analysis, including cash flow analysis
and profitability measures. Note the model extends to Column I.
The model consists of a complete ba
9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 6 - Debt Financing
PROBLEM 1
Assume Venture Healthcare sold bonds that have a ten-year maturity, a 12 percent coupon rate with
annual payments, and a $1,000 par value.
a. Suppose that two year
1. To prepare for the meeting, create a summary of the yields of each bond by completing the table shown in Exhibit 14.2.
assumed to be the required rate of return of each bond and that the semiannual YTM must be multiplied by two to get the
Face Value
An
Time Value of Money Homework
1.
Your local travel agent is advertising an extravagant global vacation. The
package deal requires that you pay $5,000 today, $15,000 one year from today,
and a final payment of $25,000 on the day you leave two years from tod
9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 4 - Time Value Analysis
PROBLEM 1
Find the following values for a lump sum:
- The future value of $500 invested at 8 percent for one year
- The future value of $500 invested at 8 percent for f
1. As a baseline, assume all cash flows have the same risk; that is, ignore residual value risk and use th
a. Should the Center lease the equipment? Should GBF write the lease?
The Center has a net advatage to leasing of $116,261, indicating that they sho
Alternative Views Homework
The following information should be used for problems #1 - 4:
Suppose that we have identified three important systematic risk factors given by
exports, inflation, and industrial production. In the beginning of the year, growth i
9/1/2014 UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 12 - Project Risk Analysis
PROBLEM 1
The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely
NPV is $120,000, but, as evidenced by the following NPV d
9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 11 - Capital Budgeting
PROBLEM 1
Winston Clinic is evaluating a project that costs $52,125 and has expected net cash flows of $12,000 per
year for eight years. The first inflow occurs one year
1. Compare the stand-alone risk / return of each of the five investment alternatives listed in Exhibit 13.1.
Economic State
Poor
Below Avg
Avg
Above Avg
Excellent
Probability
1-Yr T-bill
0.1
0.2
0.4
0.2
0.1
Standard deviation
Return
CV
Project A
7.00%
7.0
9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 4 - Time Value Analysis
PROBLEM 1
Find the following values for a lump sum:
- The future value of $500 invested at 8 percent for one year
- The future value of $500 invested at 8 percent for f
1.
Which bank should Gary choose for a saving account, which bank for a certificate of deposit, and which
bank for a term loan?
Sun Trust:
Savings Effective Annual Rate EAR = (1+4%/365)365-1 = 4.08%
CD EAR = (1+6%/12)12-1 = 6.17%
Term Loan EAR = (1+8%/4)4
DAO, XUAN NGOC
PROBLEM 1
Find the following values for a lump sum assuming annual compounding:
a. The future value of $500 invested at 8 percent for one year
b. The present value of $500 to be received in five years when the opportunity cost rate is 8 per
compounding FV
in 3 years no payments
FV
133.1 $133.10
PV
100
N
3
INT
0.1
in 5 years no payments
$161.05
Discounting PV
FV
PV
N
INT
100
($75.13)
3
0.1
25000
($21,565.22)
5
0.03
RATE: Solving for INT
FV
200
N
5
invested
75
21.67%
NPER: Solving for N
3.8017
9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 5 - Financial Risk and Required Return
PROBLEM 1
Consider the following probability distribution of returns estimated for a proposed project that involves a
new ultrasound machine:
State of th
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 10 - Capital Structure
PROBLEM 6
International Health Associates (IHA) is just about to commence operations as an international
health consulting firm. The firm will have book assets of $10 million, an
9/1/2014 UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 12 - Project Risk Analysis
PROBLEM 1
The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely
NPV is $120,000, but, as evidenced by the following NPV d
9/1/2014
UNDERSTANDING HEALTHCARE FINANCIAL MANAGEMENT
Chapter 14 - Financial Forecasting
PROBLEM 1
Florida Home Health is a small home care agency owned by a group practice of nurses and physical
therapists in Tampa, Florida. During the past few years, t
Case 31
RIVER COMMUNITY HOSPITAL (B)
Financial Forecasting
Case 1 illustrated an extensive financial and operating analysis of River Community Hospital.
In this case (Case 31), students prepare a financial plan, consisting primarily of pro forma
(forecast
Investment Decisions Homework
1.
NAU is faced with the decision of which word processor to choose. It can buy the Bang word
processor, which costs $8,000, and has an estimated annual, year-end maintenance cost of $2,000.
The Bang word processor will be re
Present Value
Future Value
Interest Rate Types
- Simple
- Compound
Stated (nominal) rate
Periodic Rate
Annuity
- Ordinary Annuity
- Annuity due
Perpetuity
Net Present Value
Net Future Value
ROI
Opportunity Cost Rate
Intra-year compounding
Effective Annual
1.1
L01 What is corporate finance?
Financial managers must ask the following 3 questions:
In what long-term assets should the firm invest in? [capital budgeting] cfw_appears on lefthand side of balance sheet
How can the firm raise cash for capital expe
CAPM Homework
1.
The variance of Stock A is 0.0016, the variance of the market is 0.0049 and the
covariance between the two is 0.0026. What is the correlation coefficient?
Correlation coefficient = 0.0026 / (0.04*0.07) = 0.9286
2.
What is the formula for
Fin 5320: Cashman
1.
If the economy booms, RTF, Inc. stock is expected to return 10%. If the economy
goes into a recessionary period, then RTF is expected to only return 4%. The
probability of a boom is 60% while the probability of a recession is 40%. Wha
Primer Homework
1. Rank the following in terms of historical risk, and historical return from highest to
lowest:, U.S. Treasury bills, Long-term Corp bonds, Large Cap Stocks, Long-term
Gov Bonds, Small Cap Stocks
Small Cap Stocks, Large Cap Stocks, Long-t
Fin 5320: Cashman
My Big Example 2
1 Your R&D department has come up with a innovative product. Your firm had
spent $2m as R&D expenses for this project. You are now wondering whether this
product introduction will increase shareholder wealth?
Investment
Investment Rules Homework
1.
You are considering the following two mutually exclusive projects that will not be
repeated. The required rate of return is 11.25% for project A and 10.75% for
project B. Which project should you accept and why?
Year
0
1
2
3
P
Fin 5320: Cashman
1. Given the following cash flows for project Z: C0 = -2,000, C1 = 600, C2 = 2160 and
C3= 6000, calculate the discounted payback period for the project at a discount rate
of 20%.
Discounted C0 = -2,000
Discounted C1 = 600/1.2 = 500
Disco