Liberty University Health & Medical Questions

BUSI 323HOMEWORK: ANALYZING FINANCIAL POSITION ASSIGNMENT INSTRUCTIONS
OVERVIEW
The homework assignment will contain a variety of short answer and essay questions focusing
on various theories/topics., assessing students’ recollection, understanding, and analysis of the
material covered.
INSTRUCTIONS
Chapters 10–13
1. What three pieces of information are needed to convert nominal dollars to constant
dollars?
2. For restating financial statements to convert to constant dollars, what index is required by
the Financial Accounting Standards Board?
3. The HC method, which uses unadjusted historical costs, does not consider depreciation
expenses, purchasing power, and unrealized gains in replacement value. Despite these
weaknesses as a financial reporting method, the HC method is used more frequently for
accounting purposes than other methods, such as the HC-GPL, CV, and CV-GPL
methods. Why is this so?
4. What are two major methods of asset valuation?
5. Inflation was 8% during the most recent year and your organization’s investment in land
rose 12%. If the beginning appraised land value was $1,000,000, what increase in
specific prices over general price level would be reported, stated in year-end dollars?
6. You purchased an MRI scanner two years ago for $2.0 million. The MRI has a 5-year
depreciable life with no salvage value. If that same MRI now costs $3.0 million, what
would be the difference between replacement cost depreciation and historical cost
depreciation?
7. What are the four critical questions that must be answered for dashboard reporting?
8. What should be a firm’s primary long-term financial objective?
9. What is/are the primary determinant(s) of firm value?
10. Listed below are the financial ratios for Calvin Community Clinic. Calvin improved its
overall financial condition from 2008 to 2009. Identify these areas of improvement and
attempt to explain how this improvement came about.
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11. Listed below are the balance sheet and statement of operations for Wynn Memorial
Nursing Home for 2008 and 2009. Compute the following ratios:
1. Current Ratio
2. Acid-test Ratio
3. Days in Accounts Receivable
4. Average Payment Period
5. Long-term Debt to Net Assets Ratio
6. Total Asset Turnover Ratio
7. Fixed Asset Turnover Ratio
8. Return on Total Assets
9. Operating Margin
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12. A nursing home projects asset growth at 10% per year over the next 10 years. If it wishes
to reduce its reliance on debt financing, what rate of equity growth over the 10-year
period will be desired?
13. Your firm reduces its days in receivables from 87 to 67, which generates $3.4 million of
new investment funds. Why does growth rate in equity increase?
14. Your firm has $45.0 million invested in accounts receivable, which is 90 days of net
revenues. If this value could be reduced to 50 days, what annual increase in income
would your firm realize if the increase in cash could be invested at 7.5%?
15. Revenues increased by 30% in your firm during the past year while total assets increased
only 5% and Equity Financing Ratios remained constant at 50.0%. Return on Equity
remained constant at 12.0%. Why didn’t Return on Equity increase?
16. Your firm’s strategic plan calls for a net increase in total assets of $100 million during the
next five years, which represents an annual compounded growth rate of 15%. Equity
growth is also projected to be 15% per year. Assume that the firm’s Total Asset Turnover
will average 1.0 in each of the five years and Equity Financing percentages will remain
constant at 50%. The firm projects Reported Income Index values to be 0.85 each year.
What is the required Total Margin that will make this plan financially feasible?
17. Program A has a profit of $5,000 and an investment of $100,000, while program B has a
profit of $10,000 and an investment of $220,000. Which program has the better ROI?
Answer the questions above and submit the Microsoft Word document to Canvas.
Note: Your assignment will be checked for originality via the Turnitin plagiarism tool.
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BUSI 323
HOMEWORK: CONSOLIDATIONS, MERGERS, AND CAPITAL FORMATION
ASSIGNMENT INSTRUCTIONS
OVERVIEW
The homework assignment will contain a variety of short answer and essay questions focusing
on various theories/topics, assessing students’ recollection, understanding, and analysis of the
material covered.
INSTRUCTIONS
Chapters 20–21
1. Suppose that HCA and Tenet were to merge. Ignoring potential antitrust problems, how
would this merger be classified?
2. List some reasons that are good motives for mergers.
Use the following data for a home health firm to answer questions 3-4.
3. What is the current value of free cash flow?
4. Using a 20 EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization),
what is the value of the firm’s equity?
Use the following data to answer questions 5-7.
Dublin Medical (DM), a large established corporation with no growth in its real earnings, is
considering acquiring 100% of the shares of Arlington Corporation, a young firm with a high
growth rate of earnings. The acquisitions analysis group at DM has produced the following
table of relevant data:
DM’s analysts estimate that investors currently expect growth of about 6% per year in
Arlington’s earnings and dividends. They assume that with the improvements in
management that DM could bring to Arlington, its growth rate would be 10% per year
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BUSI 323
beginning one year from now with no additional investment outlays beyond those already
expected.
5. What is the expected gain from the acquisition?
6. What is the net present value (NPV) of the acquisition to DM shareholders if it costs an
average $30 per share to acquire all of the outstanding shares?
7. Would it matter to DM’s shareholders whether the shares of Arlington stock are acquired
by paying cash or DM stock?
8. Explain the difference between a joint venture and a merger.
9. Explain the difference between a horizontal merger and a vertical merger.
10. What are the four sources of long-term debt financing?
11. What avenues are available for not-for-profit healthcare providers to increase their equity
position?
12. What avenues are available for for-profit healthcare providers to increase their equity
position?
13. What are the advantages to a tax-paying entity in issuing debt as opposed to equity?
14. Does adding debt increase or decrease the flexibility of a healthcare provider? Why?
15. A basis point equals how much? How many basis points are there between 6 5/8 % and 6
3/4%?
16. What are the five characteristics of long-term debt financing?
17. What factors might cause a facility to call in its bond? Name at least two.
18. You wish to retire a $10,000,000 bond that can be called in 5 years for 110% of par
value, or $11,000,000. You also need to make year-end interest payments of $700,000
per year in each of the next five years. If you can invest money at 8%, how much money
must you set aside today to meet these obligations?
19. You have decided to advance refund $10,000,000 of outstanding debt that is callable in
five years. The interest rate on these bonds is 8%. You can issue new bonds at 6%. For
every dollar of new debt issued, you will incur a 5% issuance cost. Interest payments on
the present issue are $800,000 per year with no scheduled principal payments. How much
new debt needs to be issued to realize defeasance of the present issue?
Answer the questions above and submit the Microsoft Word document to Canvas.
Note: Your assignment will be checked for originality via the Turnitin plagiarism tool.
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