Assignment #$5$ Case Study: In this assignment, students will do the following: Read case study $2,$Better Care Clinic Break Even Analysis,$$ in Reiter, Kristin, and Paula Song, Gapenski's Fundamentals of Healthcare Finance, $3$rd ed$.$ Health Administration Press, $2018($see attached$).$ Answer the questions that follow the case study. Individually prepare a Word document that that includes the responses to the six questions at the end of the case. Assignment #$5$ Purpose: This assignment is designed to support the material introduced in class on profitability analysis. It uses the case study of a clinic to afford students the opportunity to apply what they learned in class. In addition, the construction of a pro forma $($Question $1$ of the six in the case study$),$ requires students to construct a pro forma Profit and Loss statement. This will introduce the idea of a pro forma document to them and allow them to practice using a pro forma ahead of their major deliverable for the class, a pro forma budget and project plan $($Assignment #$10).$ Assignment #$5$ Description: Using Case $4,$Better Care Clinic Break Even Analysis$,$ Reiter, Kristin, and Paula Song, Gapenski's Fundamentals of Healthcare Finance, $3$rd ed$.$ Health Administration Press, $2018,$ read the case study. Individually, answer the questions at the end of the case in a paper of at least three pages and create at least one table to depict how you arrived at your answer$($s$).$ Assignment #$5$ Parameters: $$Follow the general requirements and instructions to complete your writing assignments: $$Your paper should be at least three $(3)$ pages in length, not including Works Cited. $$Use MLA format for in$-$text citations and your reference page. $$Type your responses in a Microsoft Word document. $$Upload and submit your paper to the assignment Dropbox. Table $1$ Partial Cash Flow Analysis $0123$ Land opportunity cost $($$$500,000)$ Building$/$equipment cost $(10,000,000)$ Net revenues $$5,000,000$ $$5,150,000$ $$5,304,500$ Less: Labor costs $800,000824,000848,720$ Utilities costs $50,00051,50053,045$ Supplies $2,000,0002,060,0002,121,800$ Incremental overhead $36,00037,08038,192$ Net income $$2,114,000$ $$2,177,420$ $$2,242,743$ Plus: Net land salvage value Plus: Net building$/$equipment salvage value Net cash flow $($$$10,500,000)$ $$2,114,000$ $$2,177,420$ $$2,242,7434$ QUESTIONS $1.$ Complete Table $1$ by adding the cash flows for Years $4$ and $5.2.$ What is the project$$s payback, NPV$,$ and IRR? Interpret each of these measures. $3.$ Suppose that the project would be allocated $$10,000$ of existing overhead costs. Should these costs be included in the cash flow analysis? Explain. $4.$ It is likely that many of the procedures at the outpatient surgery center would have otherwise been performed at the hospital$$s inpatient surgery unit. How should the analysis incorporate the cannibalization of inpatient surgeries? Would the handling of cannibalization change if you believed that the local physicians were going to open an outpatient surgery center of their own? $($Only discuss the issues here$---$no numbers required.$)5.$ Conduct a scenario analysis. What is the project$$s expected NPV$?$ What are the worst and best case NPVs$?$ How does the worst case value help in assessing the hospital$$s ability to bear the risk of this investment? $6.$ Now assume that the project is judged to have high risk. Furthermore, the hospital$$s standard procedure is to use a $3$ percentage point risk adjustment. What is the project$$s NPV after adjusting for the assessment of high risk? $7.$ What is your final recommendation regarding the proposed outpatient surgery center?