This weeks assignment is the third component of our ROI project. The focus of this weeks short paper writing will be to consider the justification of the capital expenditure. Three key aspects should be considered: (1) Amount and type of expenditure (2) Attainment of key decision criteria (3) Detailed financial analysis.

Using pro-forma data taken from our outside reading A Cost Benefit Analysis- Bardon, C. G., Wang, S. J., Middleton, B., Prosser, L. A., Spurr, C. D., Carchidi, P. J., et al. (2003). The American Journal of Medicine , 114.) prepare a net present value analysis by calculating a new hurdle rate using 8%, profitability index (page 458 in our text), for you capital project. Do not consider capital cost reimbursement from third-party payers in your calculation.

Finally, consider in your writing how you would factor risk such as technology change, Physician acceptance, competition from other Health Care Organizations, accuracy of market data and volume projections associated with the capital project (see attached hurdle rate determination worksheet below) in your discount rate.