# HSA 525 Week 5 And 6 Hw Contd

Assignment Exercise 11–1: Liquidity Ratios Refer to the Metropolis Health System (MHS) case study in Chapter 28. Required 1. Set up a worksheet for the liquidity ratios. 2. Compute the four liquidity ratios using the Chapter 28 MHS financial statements.

Assignment Exercise 11–2: Solvency Ratios Refer to the Metropolis Health System (MHS) case study in Chapter 28. Required 1. Set up a worksheet for the liquidity ratios. 2. Compute the solvency ratios using the Chapter 28 MHS financial statements.

Assignment Exercise 11–3: Profitability Ratios Refer to the Metropolis Health System (MHS) case study in Chapter 28. Required 1. Set up a worksheet for the liquidity ratios. 2. Compute the profitability ratios using the Chapter 28 MHS financial statements.

**Assignment Exercise 12–1:**Unadjusted Rate of Return Metropolis Health Systems’ Laboratory Director expects to purchase a new piece of equipment. The assumptions for the transaction are as follows: • Average annual net income = $70,000 • Original investment amount = $410,000 • Unrecovered asset cost at the end of useful life (salvage value) = $41,000 Required 1. Compute the unadjusted rate of return using the original investment amount. 2. Compute the unadjusted rate of return using the average investment method.

**Assignment Exercise 12–2:**Finding the Future Value (with a Compound Interest Table) John Whitten is one of the physicians on staff at Metropolis Health System. His practice is six years old. He has set up an office savings account to accumulate the funds to replace equipment in his practice. Today John is trying to figure what his equipment fund will amount to in four more years. The equipment fund savings account presently has a balance of $63,500 and any interest earned over the next four years will be left in the account. John assumes the annual interest rate will be 5%. How much money will be in the account at the end of four more years? Required Compute how much money will be in the account at the end of four more years. (Use the compound interest table found in Appendix 12-B.)

**Assignment Exercise 12–3:**Finding the Present Value (with a Present-Value Table) Part 1—Dr. John Whitten is still figuring out his equipment fund. According to his calculations he needs $250,000 to be accumulated six years from now. John is now trying to find the present value of the $250,000. He continues to assume an interest rate of 5%. Required Compute the present value of $250,000 accumulated fifteen years from now. Assume an interest rate of 5%. (Use the Present-Value Table found in Appendix 12-A at the back of this chapter.) Part 2—John doesn’t like the answer he gets. What if he can raise the interest rate to 7%? How much difference would that make?

Assignment Exercise 12–3: Finding the Present Value (with a Present-Value Table) Part 1—Dr. John Whitten is still figuring out his equipment fund. According to his calculations he needs $250,000 to be accumulated six years from now. John is now trying to find the present value of the $250,000. He continues to assume an interest rate of 5%. Required Compute the present value of $250,000 accumulated fifteen years from now. Assume an interest rate of 5%. (Use the Present-Value Table found in Appendix 12-A at the back of this chapter.) Part 2—John doesn’t like the answer he gets. What if he can raise the interest rate to 7%? How much difference would that make?

**Assignment Exercise 12–4**: Computing an Internal Rate of Return Dr. Whitten has decided to purchase equipment that has a cost of $60,000 and will produce a pretax net cash inflow of $30,000 per year over its estimated useful life of six years. The equipment will have no salvage value and will be depreciated by the straight-line method. The tax rate is 50%. Determine Dr. Whitten’s approximate after-tax internal rate of return.

**Assignment Exercise 12–5**: Payback Period The MHS Chief Financial Officer is considering alternate proposals for the hospital Radiology department. The Director of Radiology has suggested purchasing one of two pieces of equipment. Machine A costs $15,000 and Machine B costs $12,000. Both machines are estimated to reduce radiology operating costs by $5,000 per year. Required Which machine should be purchased? Make your payback calculations to provide the answer.

**Assignment Exercise 13–3**As a follow-up to the previous Practice Exercise, new assumptions are as follows: 1. Your unit’s gross charges for the period to date amount to $200,000. 2. The uniform gross charge for each procedure in your unit is $100. 3. The unit receives revenue from four major payers. The number of procedures performed for the period totals 2,000. Of that total, the number of procedures per payer (stated as a percentage) is as follows: Payer 1 = 30% Payer 2 = 40% Payer 3 = 20% Payer 4 = 10% 4. The following contractual payment arrangements are in effect for the current period. The percentage of the gross charge that is currently paid by each payer is as follows: Payer 1 = 80% [Medicare] Payer 2 = 70% [Commercial managed care plans] Payer 3 = 50% [Medicaid] Payer 4 = 90% [Self-pay] Q: How many procedures are attributed to each payer? Q: How much is the net revenue per procedure for each payer, and how much is the contractual allowance per procedure for each payer? Q: How much is the total net revenue for each payer, and how much is the total contractual allowance for each payer?

**Assignment Exercise 13–4.1:**Forecast Capacity Levels Review the information in Exhibit 13–1. The exhibit assumes three chairs and one 40-hour RN, for a realistic capacity level of seven patients infused per day. Required Prepare another Infusion Center Capacity Level Forecast as follows: Assume the same three infusion chairs, but add another nurse for either four or six hours per day. How would this change the daily capacity level for number of patients infused per day?

Exhibit 13–1 Capacity Level Checkpoints for an Outpatient Infusion Center Outpatient Infusion Center Capacity Level Checkpoints # infusion chairs ———————3 chairs # staff ———————1 RN # weekly operating hours ———————40 hours # of hours per patient infusion ———————average 2 hours (for purposes of this example)

**Assignment Exercise 14–2**: Cumulative Inflation Factor for Comparable Data Review Table 14–3 and the accompanying text. Assumptions Two hospitals report their annual projected revenue for five years to the local newspaper for a story on the area’s future economic outlook. However, Hospital 1 has applied a cumulative inflation factor of 5% per year while Hospital 2 has not applied any inflation factor. Thus the information is not properly comparable

Projected Revenue Year 1 Year 2 Year 3 Year 4 Year 5 Hospital 1 $20,000,000 $22,500,000 $27,500,000 $27,500,000 $30,000,000 Hospital 2 $20,000,000 $21,000,000 $25,000,000 $24,000,000 $26,000,000

Required Revise Hospital 2’s projections by applying a cumulative inflation factor of 5% per year.

**Assignment Exercise 14–3**The head of your department is a prominent researcher. A health research foundation has asked him travel to London to give an important speech at a conference. He will then travel to Paris to tour a research facility before returning home. Although his travel expenses are being funded by the foundation, he will still need to take along some personal money. Consequently, he asks you to figure the exchange rates for $500 and for $1,000 in both pounds and euros. He explains that he is trying to judge the spending power of U.S. dollars when converted to the other currencies so he can decide how much personal money to take on the trip. Required Locate the current exchange rates for pounds and euros and compute the currency conversion for $500 and for $1,000.

**Assignment Exercise 14–4**: The Discovery The Chief Financial Officer at Sample General Hospital has just discovered that the hospital’s Chief of the Medical Staff’s son Jason, a student at the local community college, is paid $100 per week year-round for grounds maintenance at the hospital’s Outpatient Center. The CFO, no fan of the Chief of Medical Staff, now wants you to prepare a report that compares the relative costs of lawn care at each of three locations: the hospital itself, the outpatient center, and the hospital-affiliated nursing home down the block. Required Review the available information for grounds maintenance at the three facilities. Decide how to convert this information into comparable data. Then prepare a report, based on your assumptions, that presents comparable costs of grounds care. Also provide your assessment of what the best future course of action should be.

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