Please see attached document.It has 2 questions. Each question is on a different worksheet.

Mini-Case Donna Jamison, a recent UNC graduate with four years of for-profit health management experience, was recently brought in as assistant to the chairman of the board of Computron Diagnostics, a manufacturer of clinical diagnostic equipment. The company had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Computron's results were not satisfactory, to put it mildly. Its board of directors, which consisted of its president and vice president plus its major stockholders (who were all local business people), was most upset when directors learned how the expansion was going. Suppliers were being paid late and were unhappy, and the bank was complaining about the cut off credit. As a result, Al Watkins, Computron's president, was informed that changes would have to be made, and quickly, or he would be fired. Also, at the board's insistence, Donna Jamison was brought in and given the job of assistant to Fred Campo, a retired banker who was Computron's chairman and largest stockholder. Campo agreed to give up a few of his golfing days and help nurse the company back to health, with Jamison's assistance. Jamison began by gathering financial statements and other data, shown below. The data show the dire situation that Computron Diagnostics was in after the expansion program. Thus far, sales have not been up to the forecasted level, costs have been higher than were projected, and a large loss occurred in Year 2, rather than the expected profit. Jamison examined monthly data for Year 2 (not given in the case), and she detected an improving pattern during the year. Monthly sales were rising, costs were falling, and large losses in the early months had turned to a small profit by December. Thus, the annual data look somewhat worse than final monthly data. Also, it appears to be taking longer for the advertising program to get the message across, for the new sales offices to generate sales, and for the new manufacturing facilities to operate efficiently. In other words, the lags between spending money and deriving benefits were longer than Computron's managers had anticipated. For these reasons, Jamison and Campo see hope for the companyprovided it can survive in the short run. Jamison must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Computron Diagnostics Statement of Operations Yr 1 Actual Yr 2 Actual Yr 3 Projected Revenue: Net patient service revenue $3,432,000 $5,834,400 $7,035,600 $0 $0 $0 $3,432,000 $5,834,400 $7,035,600 $2,864,000 $4,980,000 $5,800,000 $240,000 $620,000 $512,960 Insurance and other $50,000 $50,000 $50,000 Drugs $50,000 $50,000 $50,000 Depreciation $18,900 $116,960 $120,000 Interest $62,500 $176,000 $80,000 Other revenue Total revenues Expenses: Salaries and benefits Supplies Total expenses $3,285,400 $5,992,960 $6,612,960 $146,600 -$158,560 $422,640 Provision for income taxes $58,640 -$63,424 $169,056 Net income $87,960 -$95,136 $253,584 Operating income Computron Diagnostics Balance Sheet Yr 1 Actual Yr 2 Actual Yr 3 Projected Assets Current assets: Cash $9,000 $7,282 $14,000 $48,600 $20,000 $71,632 Net accounts receivable $351,200 $632,160 $878,000 Inventories $715,200 $1,287,360 $1,716,480 $1,124,000 $1,946,802 $2,680,112 Property and equipment $491,000 $1,202,950 $1,220,000 Less accumulated depreciation $146,200 $263,160 $383,160 Net property and equipment $344,800 $939,790 $836,840 $1,468,800 $2,886,592 $3,516,952 Accounts payable $145,600 $324,000 $359,800 Accrued expenses $136,000 $284,960 $380,000 Notes payable $120,000 $640,000 $220,000 $80,000 $80,000 $80,000 $481,600 $1,328,960 $1,039,800 $323,432 $1,000,000 $500,000 Common stock $460,000 $460,000 $1,680,936 Retained earnings $203,768 $97,632 $296,216 $663,768 $557,632 $1,977,152 $1,468,800 $2,886,592 $3,516,952 $8.50 $6.00 $12.17 100,000 100,000 250,000 40% 40% 40% $40,000 $40,000 $40,000 Marketable securities Total current assets Total assets Liabilities and shareholders' equity Current liabilities: Current portion of long-term debt Total current liabilities Long-term debt Shareholders' equity: Total shareholders' equity Total liabilities and shareholders' equity Other data: Stock price Shares outstanding Tax rate Lease payments ANSWER Yr 1 Actual Profitability ratios Yr 2 Actual Yr 3 Projected Total margin Return on assets Return on equity Liquidity ratios Current ratio Days cash on hand Debt management (capital structure) ratios Debt ratio Debt to equity ratio Times-interest-earned ratio Cash flow coverage ratio Asset management (activity) ratios Fixed asset turnover Total asset turnover Days sales outstanding Other ratios Average age of plant Earnings per share Book value per share Price/earnings ratio Market/book ratio Computron Diagnostics Common Size Statement of Operations Yr 1 Actual Yr 2 Actual Yr 3 Projected Revenue: Net patient service revenue Other revenue Total revenues Expenses: Salaries and benefits Supplies Insurance and other Provision for bad debts Depreciation Interest Total expenses Operating income Provision for income taxes Net income Computron Diagnostics Common Size Balance Sheet Yr 1 Actual Assets Current assets: Cash Marketable securities Net accounts receivable Inventories Total current assets Property and equipment Less accumulated depreciation Net property and equipment Total assets Liabilities and shareholders' equity Current liabilities: Accounts payable Accrued expenses Notes payable Current portion of long-term debt Total current liabilities Long-term debt Shareholders' equity: Common stock Retained earnings Total shareholders' equity Total liabilities and shareholders' equity Yr 2 Actual Yr 3 Projected ufacturer of ffices outside its t satisfactory, the expansion bout the cut off to be made, and d given the job of older. Campo mison's assistance. the dire situation 2, rather than detected an es in the early than final monthly , for the new other words, rs had anticipated. he short run. nancial health, Industry Average 3.6% 9.0% 17.9% 2.70 22.0 50.0% 2.5 6.2 8.00 7.00 2.50 32.0 6.1 n/a n/a 16.20 2.90 Industry Average 100.0% 0.0% 100.0% 84.5% 3.9% 0.3% 0.3% 4.0% 1.1% 94.1% 5.9% 2.4% 3.5% Industry Average 0.3% 0.3% 22.3% 41.2% 64.1% 53.9% 18.0% 35.9% 100.0% 10.2% 9.5% 2.4% 1.6% 23.7% 26.3% 20.0% 30.0% 50.0% 100.0% Lewis Health System Inc. has decided to acquire a new electronic health record system for its Richmond hospital. The system rec clinical data and other patient information from nursing units and other patient care areas, then either displays the information screen or stores it for later retrieval by physicians. The system also permits patients to call up their health record on Lewis's web The equipment costs $1,000,000, and, if it were purchased, Lewis could obtain a term loan for the full purchase price at a 10 perc interest rate. Although the equipment has a six-year useful life, it is classified as a special-purpose computer, so it falls into the M three-year class. If the system were purchased, a four-year maintenance contract could be obtained at a cost of $20,000 per year, at the beginning of each year. The equipment would be sold after four years, and the best estimate of its residual value at that tim $200,000. However, since real-time display system technology is changing rapidly, the actual residual value is uncertain. As an alternative to the borrow-and-buy plan, the equipment manufacturer informed Lewis that Consolidated Leasing would be to write a four-year guideline lease on the equipment, including maintenance, for payments of $260,000 at the beginning of each Lewis's marginal federal-plus-state tax rate is 40 percent. You have been asked to analyze the lease-versus-purchase decision, an process to answer the following questions: a. What is the present value cost of owning the equipment? b. What is the present value cost of leasing the equipment? c. What is the net advantage to leasing (NAL)? d. Answer these questions one at a time to see the effect of the change on NAL. That is, starting with the original numbers you used for questions a. and b., what is the NAL if: - interest rate increases to 12 percent - the tax rate falls to 34 percent - maintenance cost increases to $25,000 per year - residual value falls to $150,000 - the system price increases to $1,050,000 e. Do the changes in d. make leasing more or less attractive? Explain. Richmond hospital. The system receives en either displays the information on a heir health record on Lewis's website. he full purchase price at a 10 percent ose computer, so it falls into the MACRS ined at a cost of $20,000 per year, payable ate of its residual value at that time is sidual value is uncertain. at Consolidated Leasing would be willing $260,000 at the beginning of each year. ease-versus-purchase decision, and in the