You have been asked to provide an estimate of the value for an outpatient clinic that your
Question:
You have been asked to provide an estimate of the value for an outpatient clinic that your healthcare organization is interested in buying. The financial data is provided below:
Projected Outpatient Clinic Cash Flows:
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Net Income | $3,000 | $3,750 | $4,400 | $5,059 | $5,875 |
Depreciation | $1,240 | $1,520 | $1,990 | $2,300 | $2,584 |
Working Capital | $ 675 | $ 675 | $775 | $875 | $974 |
Capital Expenditures | $5,000 | $4200 | $1200 | $800 | $540 |
Free Cash Flows | $(1600) | $(875) | $(1,240) | $(4,300) | $(3.300) |
Use the assumed discount rate of 10% to value the firm and assume that the 5th year cash flow will carry into the future.
Fill in the chart below: (60 points)
Outpatient Clinic Valuation:
After you complete the table above, answer the following questions:
- What additional information or steps would you suggest to your organization? (20 points)
- What would change in your overall evaluation if this outpatient clinic was serving an impoverished area in your community and there was no other clinic providing those services in that area? (10 points)
PV of Cash Flows | Amount | PV Factor | PV |
Year 1 | |||
Year 2 | |||
Year 3 | |||
Year 4 | |||
Year 5 | |||
Present Value or Residential Value Cash flows after Year 5 | |||
Total Value |
Auditing and Assurance services an integrated approach
ISBN: 978-0133125689
15th edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley