Knowing you have just completed a financial management course in Healthcare Finance, a potential employer is...

 

Transcribed Image Text:

Knowing you have just completed a financial management course in Healthcare Finance, a potential employer is seeking your advice on selecting a revenue generating investment. She is considering investing $500,000 in For Profit Hospital Corporation of America (HCA) bonds that carry a 11.5 percent interest rate, or Twin Cities Non-Profit Hospital, that is issuing tax-exempt bonds that have an interest rate of 8 percent. SHE IS IN THE 38% PERSONAL TAX BRACKET a). Please show: 1) the amount of investment income earned and 2) the total amount of the return on the incestment including principal and interest. b). Please determine the interest rate where the investor would earn the same interest regardless of which investment she selects. c). Do you advise investing in $500,000 of the HCA or $500,000 of the Twin Cities bonds? What is your recommendation? Knowing you have just completed a financial management course in Healthcare Finance, a potential employer is seeking your advice on selecting a revenue generating investment. She is considering investing $500,000 in For Profit Hospital Corporation of America (HCA) bonds that carry a 11.5 percent interest rate, or Twin Cities Non-Profit Hospital, that is issuing tax-exempt bonds that have an interest rate of 8 percent. SHE IS IN THE 38% PERSONAL TAX BRACKET a). Please show: 1) the amount of investment income earned and 2) the total amount of the return on the incestment including principal and interest. b). Please determine the interest rate where the investor would earn the same interest regardless of which investment she selects. c). Do you advise investing in $500,000 of the HCA or $500,000 of the Twin Cities bonds? What is your recommendation?

Answer rating: 100% (QA)

To compare the two investment options well calculate the investment income earned and the total retu... View the full answer