What are the issues in this case?

2. What are the differences between nonprofit institutions and for-profit institutions? What are the nonfinancial drivers for adding an LTAC facility to the U.Va. Health System? What are potential reasons the board may not approve the project from a nonfinancial standpoint?

3. Weighted-average cost of capital. Please use the WACC worksheet in the excel supplement file to facilitate your calculation. Make sure your cells contain formula that shows your calculation. Otherwise, please provide explanations about how you come up with the numbers. Please assume a market risk premium of 6.0% for your cost of equity estimations. Would this serve as a reasonable discount rate to analyze a set of for-profit LTAC facility cash flows? Should Fitzgerald use this number to discount the U.Va. LTAC facilitys cash flows? In your write-up, please explain clearly your reasons why the non-profits WACC is similar/dissimilar to the for-profits WACC.

4. Capital Budgeting Analysis. Please use the Cash Flow worksheet for your analysis. Please use the WACC you estimated in Q3 as your discount rate. All cash inflows should be entered as positive numbers and all cash outflows should be entered as negative numbers. Calculate the base case NPV and IRR with the assumptions given.

i. Note: For the section Other-- If you feel that there should be additional items included --please include them under this section. Do not feel obligated to include items here. Which assumptions do you think will be of the most interest to the board of directors? Show the impact on NPV using sensitivity analysis by creating several data tables based on the drivers you identify.

5. Conclusion: Combining the financial factors and non-financing factors, should Fitzgerald propose the LTAC project in the board meeting?

Note: Please do not use Q&A format for your report; I recommend you to structure your report in the following way: Overview of the case, Each analytical section should have a proper section title & Conclusion

You should send me two files: the actual report AND the excel worksheet. 2

Please send me all Excel Exhibits that support your analysis. Make sure all exhibits are properly labeled from Exhibit 1 to Exhibit X. In writing your report, make sure you refer to the Exhibits properly. You should include at least THREE Exhibits in your appendix: Include one exhibit that details the WACC calculation. Include one exhibit for cash flow analysis. Include one exhibit for sensitivity analysis. Make sure your excel work book contains ALL formulas that you used in your calculation. Spreadsheet/cells without formulas will not receive credit.