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You are a consultant with 10 years experience in the health care insurance industry. A group of 20 doctors is considering forming a new medical group. The group has asked you to prepare a report on whether it should build a facility within 30 miles of the downtown center of a city with a population of 500,000 for $100 million dollars. Prepare a report for the management team of the doctor’s group on your proposed $100 million expenditure plan. In your report, reflect on the key course objectives as well as the financial, legal, and alternative health care models. In addition, reinforce your knowledge of strategic planning and capital budgeting by using an electronic spreadsheet to display the financials.
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- You are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.1 million for this report, and I am not sure their analysis makes sense. Before we spend the $20 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income Income tax = Net income 1 26.000 15.600 2 26.000 15.600 10.400 10.400 1.600 1.600 2.000 2.000 6.800 2.38 4.420 6.800 2.38 4.420 ... 9 26.000 15.600 10.400 1.600 2.000 6.800 2.38 4.420 10 26.000 15.600 10.400 1.600 2.000 6.800 2.38 4.420 All of the estimates in the report seem correct. You note that the consultants used straight-line depreciation for the new…arrow_forwardA state department of health is considering a public awareness campaign to encourage vaccination. It determines that the cost of this campaign would be $750,000 per year for the next 6 years. It estimates that the campaign would reduce rates of illness and communicable disease. At the end of the first year of the campaign, the resulting savings would be $1,040,000; the savings would decrease by $80,000 each of the following 5 years. Assuming a discounting factor of 8%, compute the benefit cost ratio. Carry all interim calculations to 5 decimal places and them round your final answer to two decimal places.arrow_forwardMunabhaiarrow_forward
- please go step by step or explain how you got the answerarrow_forwardYou are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.5 million for this report, and I am not sure their analysis makes sense. Before we spend the $28 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income - Income tax = Net income 1 31.000 18.600 2 31.000 18.600 12.400 2.240 12.400 2.240 2.800 2.800 7.360 7.360 2.576 2.576 4.784 4.784 9 31.000 18.600 12.400 2.240 2.800 7.360 2.576 4.784 10 31.000 18.600 12.400 2.240 2.800 7.360 2.576 4.784 All of the estimates in the report seem correct. You note that the consultants used straight-line depreciation for the new…arrow_forwardA nonprofit decides to provide free food for the homeless in Thanksgiving holidays. The manager wants to write a proposal to raise money from their donors. Assume that the project requires a fixed cost of $5,000 for staff and equipment. The variable cost such as utensils and food is $5 per person served. Based on the manager's experience, the manager estimates there will be 200 homeless people to serve. What is the price per person that the manager should put into his/her proposal? a.$5 b.$30 c.$25 d.$5,000arrow_forward
- You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.0 million for this report, and I am not sure their analysis makes sense. Before we spend the $25 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Project Year Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income 1 30.000 18.000 12.000 2.000 2.500 7.500 2 30.000 18.000 12.000 2.000 2.500 7.500 9 30.000 18.000 12.000 2.000 2.500 7.500 10 30.000 18.000 12.000 2.000 2.500 7.500 a. Given the available information, what are the free cash flows in years 0 through 10 that should be…arrow_forwardYou are a manager at Northern Fibre, which is considering expanding its operations in synthetic fibre manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.6 million for this report, and I am not sure their analysis makes sense. Before we spend the $16 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income Income tax = Net income 1 2 35.000 35.000 21.000 21.000 14.000 14.000 1.280 1.280 1.600 1.600 11.1200 11.1200 3.892 3.892 7.228 7.228 9 35.000 21.000 14.000 1.280 1.600 11.1200 3.892 7.228 10 35.000 21.000 14.000 1.280 1.600 11.1200 3.892 7.228 All of the estimates in the report seem correct. You note that the consultants used straight-line depreciation for the…arrow_forwardSam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company’s pension fund management division. An important new client, the North-Western Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation. C) How does one determine the value of any asset whose value is based on expected future cash flows? D)How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%? E) What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?arrow_forward
- You are a manager at Percolated Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.9 million for this report, and I am not sure their analysis makes sense. Before we spend the $18 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Sales revenue - Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income - Income tax 1 34.000 20.400 13.600 1.440 1.800 10.360 2.072 Project Year 2 34.000 20.400 13.600 1.440 1.800 10.360 2.072 9 34.000 20.400 13.600 1.440 1.800 10.360 2.072 10 34.000 20.400 13.600 1.440 1.800 10.360 2.072 a. Given the available information, what are the free cash…arrow_forwardPlease answer the 2 questions belowarrow_forwardYou are a manager at Percolated Fiber, which is considering expanding its operations in synthetic fiber manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, "We owe these consultants $1.2 million for this report, and I am not sure their analysis makes sense. Before we spend the $29 million on new equipment needed for this project, look it over and give me your opinion." You open the report and find the following estimates (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Project Year Sales revenue Cost of goods sold = Gross profit - General, sales, and administrative expenses - Depreciation = Net operating income - Income tax 1 25.000 15.000 10.000 2.320 2.900 4.780 1.434 2 25.000 15.000 10.000 2.320 2.900 4.780 1.434 9 25.000 15.000 10.000 2.320 2.900 4.780 1.434 10 25.000 15.000 10.000 2.320 2.900 4.780 1.434 a. Given the available information, what are the free cash flows in…arrow_forward
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