2. Conceptually, what is the appropriate discount rate to apply to the cash flows? What is your actual numerical estimate? Do you have much confidence in it?

3. What is your estimate of Lexington Generals value to St. Josephs using the DCF valuation technique? What are the strengths and weaknesses of this technique both in general and as applied in this situation?

4. A major concern in any DCF valuation is the accuracy of both the terminal (long-term) growth rate and discount rate estimates. How sensitive is the acquisition value to these estimates?

5. What is your estimate of Lexington General's value using the market multiple valuation technique? What are the strengths and weaknesses of this technique both in general and as applied in this situation? (Remember that there are two bases for this approachEBITDA and number of discharges.)

6. What is your final conclusion regarding the value of Lexington General to St. Josephs? How much should St. Josephs initially offer for Lexington General?

	Lexington	St. Jospehs
Average age of plant	6.8 years	8.5 years
Licensed beds	400	525
Occupancy rate	52.7%	64.2%
Average Length of stay	5.5 days	6.6 days
Number of discharges	11,412	19,748
Medicare percent	57.2%	29.7%
Medicaid percent	10.3%	13.0%
Medicare case mix index	1.51	2.13
Gross price per discharge	$11,688	$20,204
Net price per discharges	$5,850	$12,757
Cost per discharge	$5,703	$12,144