A surgery center specializes in high-risk cardiovascular surgery. The center needs to forecast its profitability over the next three years to plan for capital growth projects. For the first year, the hospital anticipates serving 1,300 patients, which is expected to grow by 9% per year. Based on current reimbursement formulas, each patient provides an average billing of $125,000, which will grow by 2% each year. However, because of managed care, the center collects only 25% of billings. Variable costs for supplies and drugs are calculated to be 10% of billings. Fixed costs for salaries, utilities, and so on will amount to $20,000,000 in the first year and are assumed to increase by 5% per year. Develop a spreadsheet model to predict the net present value of profit over the next three years. Use a discount rate of 4%. (Type whole numbers.) A 1 2 3 4 5 6 7 Growth Rates Year 1 B Collection % Variable Cost % Discount Rate % C % % % % Patients Served Average Billing $ D Collected Amount E Variable Costs Y F % Fixed Costs S C G Total Collected H I Total Costs Total Profit

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A surgery center specializes in high-risk cardiovascular surgery. The center needs to forecast its profitability over the next three years to plan for capital growth projects. For the first year, the hospital
anticipates serving 1,300 patients, which is expected to grow by 9% per year. Based on current reimbursement formulas, each patient provides an average billing of $125,000, which will grow by 2% each
year. However, because of managed care, the center collects only 25% of billings. Variable costs for supplies and drugs are calculated to be 10% of billings. Fixed costs for salaries, utilities, and so on will
amount to $20,000,000 in the first year and are assumed to increase by 5% per year. Develop a spreadsheet model to predict the net present value of profit over the next three years. Use a discount rate of
4%.
(Type whole numbers.)
A
1
23456
7
Growth Rates
Year 1
B
Collection %
Variable Cost%
Discount Rate
%
Patients Served
C
%
%
%
%
Average Billing
$
D
Collected
Amount
E
Variable
Costs
F
$
%
Fixed Costs
...
G
Total
Collected
H
I
Total Costs Total Profit
Transcribed Image Text:A surgery center specializes in high-risk cardiovascular surgery. The center needs to forecast its profitability over the next three years to plan for capital growth projects. For the first year, the hospital anticipates serving 1,300 patients, which is expected to grow by 9% per year. Based on current reimbursement formulas, each patient provides an average billing of $125,000, which will grow by 2% each year. However, because of managed care, the center collects only 25% of billings. Variable costs for supplies and drugs are calculated to be 10% of billings. Fixed costs for salaries, utilities, and so on will amount to $20,000,000 in the first year and are assumed to increase by 5% per year. Develop a spreadsheet model to predict the net present value of profit over the next three years. Use a discount rate of 4%. (Type whole numbers.) A 1 23456 7 Growth Rates Year 1 B Collection % Variable Cost% Discount Rate % Patients Served C % % % % Average Billing $ D Collected Amount E Variable Costs F $ % Fixed Costs ... G Total Collected H I Total Costs Total Profit
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