{"id":53055,"date":"2022-04-16T15:07:47","date_gmt":"2022-04-16T15:07:47","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/uva-health-system-the-long-term-acute-care-hospital-project\/"},"modified":"2022-04-16T15:07:47","modified_gmt":"2022-04-16T15:07:47","slug":"uva-health-system-the-long-term-acute-care-hospital-project","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/uva-health-system-the-long-term-acute-care-hospital-project\/","title":{"rendered":"Uva health system: the long-term acute care hospital project"},"content":{"rendered":"<div>\n<p>Case\u00a0UVa Health System: The Long-Term Acute Care Hospital Project\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Wk 3 is the first of two consecutive weeks on CAPITAL BUDGETING. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0<br \/>\u00a0You will learn the three steps in capital budgeting:\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a01\u00a0Identify relevant incremental cash flows\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a02\u00a0Calculate cost of capital (k-wacc) to use as the discount rate\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a03\u00a0Calculate the\u00a0 metrics of capital budgeting: Net Present Value, Profitability Index, \u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0Internal Rate of Return, and Payback Period. \u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Then, you will apply the metrics and information in the case study to make a recommendation\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0whether to accept or reject the LTAC project.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0The essence of the capital budgeting process is to make sure, BEFORE an investment is made,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0that its prospective rate of return is high enough to justify the investment.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>Reading\u00a0Cohen Finance Workbook chapter 4 is a review of Time Value of Money, which you covered in a previous course.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Review it as necessary, but defer the review until you look at the TVM applications in chapter 5 beginning on p 79.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0You need to know TVM to understand the capital budgeting metrics of NPV, PI, and IRR. Make sure you\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0have that context in mind before reviewing the TVM chapter 4 (only if you need to). \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Give the Uva Health Care System: The Long-Term Acute Care Hospital Project Case a quick read to understand what is going on &#8211; about \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0calculating k-wacc and the decision metrics for the project, to give it either a green light or a red light.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Wk 3 gives you practice on the basics. You won&#8217;t have a full understanding of what the LTAC Project case is about at\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0the end of Wk3. In Wk4, you will return to the case, analyze the project, and make a recommendation.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Look at the Wk 3 assignment questions in the Q1, Q2, Q3 tabs.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Read Cohen Finance Workbook chapter 5 selectively. Focus on:\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0See the FLOW DIAGRAM in GREEN depicting the CAPITAL BUDGETING template.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0See the IS\/BS Model in GREEN depicting the connection between PPE (BS) and operating expense (IS).\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Read pps 61-65 as a general introduction to capital budgeting.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Read pps 70-76 on weighted average cost of capital to answer Q1.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Read bottom p 67 to 69 on Net Working Capital to answer Q2.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Read pps 79-85 on NPV, PI, IRR, PP to answer Q3.\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>Questions\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0See tabs for Q1, Q2, Q3\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0THESE QUESTIONS MUST BE ANSWERED USING EXCEL.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0MAKING CALCULATIONS OUTSIDE THE SPREADSHEET AND ENTERING THE RESULTS IS NOT USING EXCEL.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0YOU MUST USE EXCEL FORMULAS FOR MAKING CALCULATIONS!\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>Case\u00a0UVa Health System: The LATC Hospital Project\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0Wk 4 is the second of two weeks on CAPITAL BUDGETING \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0Study the Wk 3 Solutions Template before proceeding into Wk 4.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>Learning Objectives\u00a0\u00a0(repeated from Wk3 Assignment Template)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0You will learn the three steps in capital budgeting:\u00a0\u00a0\u00a0\u00a0\u00a0SEE THE FLOW DIAGRAM &#8211; YOU ARE NOW WORKING ON THE GREEN-COLORED ANALYSIS.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a01\u00a0Identify relevant incremental cash flows\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a02\u00a0Calculate cost of capital (k-wacc) to use as the discount rate\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a03\u00a0Calculate the\u00a0 metrics of capital budgeting: Net Present Value, Profitability Index, \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0Internal Rate of Return, and Payback Period. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Then, you will apply the metrics and information in the case study to make a recommendation\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0about which of the two projects to accept.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0The essence of the capital budgeting process is to make sure, before an investment is made,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0that its prospective rate of return is high enough to justify the investment,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0i.e., that the project is CREATES value, not DESTROYS value.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>Directions\u00a0\u00a0(some repeating from Wk3 Assignment Template)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>1\u00a0Make a quick scan through the LTAC case and the exhibits. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>2\u00a0Listen to the Intro Audio\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>3\u00a0Cohen Finance Workbook chapter 4 is a review of Time Value of Money, which you covered in a previous course.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0Review it as necessary, but defer the review until you look at the TVM applications in chapter 5 beginning on p 79.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0You need to know TVM to understand the capital budgeting metrics of NPV, PI, and IRR. Make sure you\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0have that context in mind before reviewing the TVM chapter 4 (only if you need to).\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>4\u00a0Read the case again, to grasp all the details, especially the Mulroney memo to her boss.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>5\u00a0To understand how a capital budgeting template works, follow the step-by-step procedure in the book, pages 61-70\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>6\u00a0Scan pages 70-76 on weighted average cost of capital. No need to emphasize at this point because discount rates are given in the case.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>7\u00a0Read pages 79-84 on NPV, PI, IRR, PP.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>8\u00a0Pages 83-85 show a worked-out example of a capital budgeting decision.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>Questions\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0If you work with a group, write answers on your own, independently. Group answers violate academic integrity requirements. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>1\u00a0See Q1 tab.\u00a0Scroll down until you see the questions.\u00a0\u00a0\u00a0\u00a0Capital Budgeting Template\u00a0\u00a0\u00a0The template calculates FREE CASH FLOW=[EBIT-TAX+DEPREC]+\/-CHANGE NWC+\/-CAPEX.\u00a0\u00a0\u00a0\u00a0<br \/>2\u00a0See Q2 tab.\u00a0Scroll down until you see the questions.\u00a0\u00a0\u00a0\u00a0K-wacc\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The 1st term is income statement data; the 2nd &amp; 3rd terms are balance sheet data.\u00a0\u00a0\u00a0\u00a0<br \/>3\u00a0See Q3 tab.\u00a0Scroll down until you see the questions.\u00a0\u00a0\u00a0\u00a0Sensitivity Analysis\u00a0\u00a0\u00a0\u00a0LEARN THIS FORMULA (EQUATION) COLD!\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<br \/>\u00a0\u00a0Expect to revisit these calculations and decisions in Wk7.\u00a0\u00a0<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Case\u00a0UVa Health System: The Long-Term Acute Care Hospital Project\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wk 3 is the first of two consecutive weeks on CAPITAL BUDGETING. \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0You will learn the three steps in capital budgeting:\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a01\u00a0Identify relevant incremental cash flows\u00a0\u00a0\u00a0\u00a0\u00a0\u00a02\u00a0Calculate cost of capital (k-wacc) to use as the discount rate\u00a0\u00a0\u00a0\u00a0\u00a0\u00a03\u00a0Calculate the\u00a0 metrics of capital budgeting: Net Present Value, Profitability Index, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-53055","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/53055","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=53055"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/53055\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=53055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=53055"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=53055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}