An analysis of the best investment decision by Jim

Introduction This paper, as indicated in the abstract discusses the financial viability appraisal methods that were used to advice the management of Jim-care medical centre on which of the two capital investment options to make. The hospital is a medium, but growing health centre that has a strategic plan to expand to attain a level of a fully fledged 24 hour service hospital with over 300 bed capacity. Currently, the institution has only 25 beds and the future looks as bright as it can be.Advertising We will write a custom essay sample on An analysis of the best investment decision by Jim-care medical venter specifically for you for only $16.05 $11/page Learn More While the ultimate goal of the hospital is to provide high quality medical care to the community, thus enhancing the social welfare of the people, the hospital has financial goals as well as it aims to make profits (Antony Robert, 2011). This will go a long way in helping it finance its curre nt and future expansion plans. The challenge at hand is therefore the insufficient funds to undertake many projects at the same time. This has made the hospital carry out several financial appraisal activities in the past so as to establish the ones that deserve the priority over others. This paper discusses one such financial appraisal activity that was commissioned by the management to identify which of the two capital expenditure projects that are in their strategic plan ought to be undertaken first. The main concern by the management of the hospital at the time was the cash flows since the cash generated by the services was not sufficient to meet all their operational and investment needs. The method used to carry out the appraisal was therefore the discounted cash flow method Net present value (NPV). Net present value is a financial appraisal method that takes in to consideration the time value of money and given the present value of the future cash flows (Wolf Sylvester, 2009 ). This once obtained is compared with the initial cash outlay and a decision is made to adopt the project that has a higher NPV where there are two or more mutually exclusive projects. If the method is used to appraise just one project an NPV above zero indicates that the project is viable and should be undertaken. The Hospital financial history and their strategic plan Jim-care medical center has been in operation for the last ten years. As such, it has recorded some considerable growth and it aims to have an increased growth in the next ten years. This is due to its strategic planning that takes a ten year span. The Year 2011 marked its first decade in operation and also marked a period where the hospital’s achievement of the set targets was to be evaluated. The institution had achieved virtually all the set goals and this served as an underlying stratum for the next ten year strategic planning (Barney, 1991). The hospital has however had difficulties with finances as some times they have been forced to borrow so as to boost their liquidity in order to meet their operational as well as recurrent expenditures. One of the objectives of the institution in the next ten years is to acquire improve in their financial position through increasing their liquidity as well as their cash flows.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The Two projects The first project intends to construct a recreational facility for the hospitals’ staff who include the doctors, nurses, and the other medical staff. The aim of the project is to reduce the stress levels of the employees so as to enhance their service delivery. It was noted with concern that some doctors are experiencing fatigue during work and this resulted in some negligence while performing their duties. The project therefore aims to build a facility where the employees can go after work and have some relax ation and which would ensure that they have good rest. Some of the activities that to be carried in the facility is aerobics, in-door games such as table tennis, massage, and several other services. These activities are mean to provide a warm-down to the staff more so after work. The facility’s budget is $1,500,000.00 and is expected to pay back in the ten months. This is because its expected life is two years and before then it needs to have generated enough cash flows to enable the hospital’s management to carry out the other intended capital investments. The second project entailed building a cancer care center for the post admission therapy for the cancer patients. This was established as a need by the community since the hospital has a cancer treatment program that majorly includes chemo therapy. However, after carrying out the chemo-therapy the patients are referred to other medical centers since the institution has not yet built a cancer-care facility. The facil ity had a budget of $1,000,000.00 and was expected to generate the cash flows to pay back the investment in 8 months after which normal routine maintenance would be undertaken. Some of the activities intended for the facility were the post-chemo therapy care, rehabilitation as well as counseling. The hospital’s management had to choose between the two projects because the amount of cash they had then was not sufficient to undertake the two projects concurrently. By the end of the ten years strategic period, the hospital however intends to have built the two facilities. In this scenario, the limiting factor was the availability of the finances to fund the projects and as such the appraisal method that was used to come up with the investment advice was a financial quantitative method; Net present value as well as the Payback period (Milner, 2003). Other qualitative methods were considered as well but they did not prevail over the quantitative ones (Wild, Supranyam, Hasley, 200 7).Advertising We will write a custom essay sample on An analysis of the best investment decision by Jim-care medical venter specifically for you for only $16.05 $11/page Learn More The link between the strategic plan and the financial decision As indicated earlier, Jim-care health center has a ten year strategic period in which it evaluates the achievements of the past ten years set goals, re-adjusts where the need arises as well as sets new strategic targets for the next one decade. One such target is to improve the liquidity so as to fully fund their cash needs through proceeds from the hospital operations rather than engaging in borrowings (Barney, 1991). The hospital therefore intends to increase their revenue base through introducing other revenue streams so as to improve the cash-flows. The two projects had were considered since they were expected to generate adequate cash flows to pay back the outlay in a period of less than 16 months. Once thes e projects had paid back in the set time period, any further cash in-flow is considered to be profits from the investment. The increased cash flow would offer the institution with additional cash flows to carry out further future investment decisions as well as meeting their recurrent expenditure and operational cash needs as they fall due (Frederick, 2001). An attainment of this goal would therefore be a milestone in achieving the hospital’s ten year strategic goal. The results of the projects appraisal were therefore necessary in establishing the most viable of the two projects. The finance team The hospital commissioned a team of five financial professional where I held the position of the chair of the committee. The time period for the whole process was one month where all the available financial literature, data collection, analysis, and presentation of the report were required. The experienced was tremendous since most of the environment provided a practical view of wha t had been learnt in class as theory. It enabled the whole team apply the financial appraisal methods theoretical framework in real life financial scenarios. The results were however encouraging as the financial and economic knowledge that was learn in class was put into practice. The methods that were used in appraising the two projects were the pay-back period and the Net Present value (NPV). This is because of the specific needs of the management. the hospital required to engage in a project that would generate cash flows which would pay back the cash the soonest. This necessitated the need for payback period as a quantitative method. The hospital also wanted to establish the project that would have higher cash flows in the soonest time and this necessitated the use of the Net Present Value. The Findings from the appraisal methods Using the payback period, the first project which entailed construction of a recreational facility for the staff had the following data.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More recreation Payback Period month C-flow Cumulative 1 235,200 235,200 2 280,910 516,110 3 320,123 836,233 4 363,483 1,199,716 5 409,909 1,609,625 6 459,617 2,069,242 7 512,840 2,582,082 4.73 The payback period was 4.73 months The second project had the following data available cancer care Cumulative month C-flow 1 160,000 160,000 2 184,500 344,500 3 201,200 545,700 4 230,958 776,658 5 265,328 1,041,986 6 305,236 1,347,222 7 351,820 1,699,042 8 406,478 2,105,520 4.84 The payback period for the cancer care center was 4.84 months Analysis using the Net Present value (NPV) Using the net present value to evaluate the projects, the following data were obtained. recreational facility PERIOD CASH FLOW month Investment cash flow Pvif 12% PV 0 -1,500,000 1 -1,500,000 1 235,200 0.8929 210,010 2 280,910 0.7972 223,941 3 320,123 0.7118 227,864 4 363,483 0.6355 230,993 5 409,909 0.5674 232,582 6 459,617 0.5066 232,842 7 512,840 0.4523 231,958 8 369,495 0.4039 149,239 9 391,194 0.3606 141,065 10 413,917 0.322 133,281 TOTAL 0 2,256,688 NPV 513,775 The data for the cancer care center was as follows cancer care center PERIOD CASH FLOW month Investment cash flow Pvif 12% NPV 0 -1,000,000 1 -1,000,000 1 160,000 0.8929 142,864 2 184,500 0.7972 147,083 3 201,200 0.7118 143,214 4 230,958 0.6355 146,774 5 265,328 0.5674 150,547 6 305,236 0.5066 154,633 7 351,820 0.4523 159,128 8 406,478 0.4039 164,176 TOTAL 0 1,105,520 208,420 The analysis of the findings The first method that was used to evaluate the project was the payback period. Payback period is the time that elapses before the project generates cash in-flows to offset the initial outlay (Wild, Supranyam, Hasley, 2007). Projects with shorter payback periods are preferred over the ones with longer ones. This is because of the risk that is associated with unforeseen future circumstances more so in the macro-economic environment. When appraising one project, the management sets the required payback period and if the project does not beat the set deadline by the management the project is rejected. Using this appraisal method, the recreational facility construction is the preferred one sine it has a shorter payback period of 4.73 years as compared to the cancer care center payback period of 4.84 years. The Net present value The Net Present Value is the most desired capital appraisal technique since it considers the time value of money. It is defined as the difference between the initial cash outlay and the present value of the future cash in-flows that a project generates (Wendy Mayer, 2003). It also considers other financial measures such as the cost of capital and as such, the management is able to make informed decisions on the market conditions. When using this method to appraise mutually exclusive projects, the pro ject with the highest net present value is chosen over the one that has a lower one. When appraising a single project’s viability, a project is considered acceptable if it has a net present value above zero. this means that the present value of the future cash flows is more than the present value of the cash outlay. Using this method to appraise Jim-care health center, the project that was preferred was the construction of the recreation facility for the staffs. This is because the study showed that the facility had a net present value of $513,775.00 as compared to the cancer care center that had a net present value of $208,420.00 The qualitative non-financial factors When carrying out financial appraisals, several non-financial factors are considered. These include such factors as the social welfare of the stakeholders, the environment conservation, and the motivational levels of employees which may not be captured in the quantitatively (Chrystal Lipsey, 1997). The non fina ncial factors that were considered in this study were the welfare of the cancer patients and the motivational level of the staffs. Building the cancer care center would be very beneficial to the cancer patients in the community. This is because though it generated less cash flow projection than the recreational facility, the cancer care center would be of great qualitative need to the organization. This was however not the priority as at then as the hospital had cash flow difficulties and needed projects that would increase their cash flow requirements. The other non-financial qualitative consideration considered was the motivation of employees at the hospital. The hospital management highly regarded this is an urgent need among the organization staff and as such, the choosing of the project highly regarded this need. The recreation center was chosen since it positively impacted n the motivation of the employees who saw that their welfare was being put into consideration by the mana gement. This was an addition reason as to why the team advised the management undertake this project. The outcome of the project The management as was advised went on to undertake the construction of the recreational facility. This resulted in a more than the expected returns since the amount of money invested was recovered in the first 5 months after the completion of the project. This means that the financial techniques used were highly effective and the hospital has been able to improve its liquidity as well as the cash flows. The consideration of the non-financial factors in the appraisal of the project was a also effective since the motivational levels of the employees has gone up considerable. The hospital is now in the process of undertaking the other project of building the cancer care center which promises to be a huge success as well. References Antony, A. A., Robert, S. K. (2011). Management Accouting: Information for Decision-Making and Strategy Execution. New York: Quo rum Books. Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management , 99-120. Chrystal, K. A., Lipsey, R. G. (1997). Economics for Business and Management. New York: Oxford University Press. Frederick, B. (2001). Executive Strategy: Strategic Management and Information Technology. New York: John Wiley Sons. Milner, J. F. (2003). Ivestment Decisions Under Capital Rationing. New York: Mc Graw Hill. Wendy, C., Mayer, C. (2003). Finance, Investment and Growth. Journal of Financial Economics , 10-326. Wild, J. J., Supranyam, K. R., Hasley, R. B. (2007). Financial Statement Analysis. New York: Mc Graw Hill. Wolf, W., Sylvester, E. (2009). Efficiency of capital taxation in an open economy: tax competition versus tax exportation. European Journal of Political Research , 637-646. This essay on An analysis of the best investment decision by Jim-care medical venter was written and submitted by user Analia Boyer to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.

Post-Cold War Conflicts and International Order essays

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Sonnys Blues Plot Analysis

Sonnys Blues Plot Analysis The contrasting lives of two brothers contribute to the theme of being safe while being risk takers. In this story, Baldwin writes about two brothers who grew up together. As each of the boys grew older, their friendship diminished and they ended up having two completely different lives. The narrator, who is the older brother seemed to be more cautious and had a more determined manner to develop a good future. Sonny, the younger brother, was more free and adventurous as he lived in the moment. Sonny did not even know what his plans were for the next hour, let alone the rest of his life. The narrators greatest source of dissatisfaction was his selfish desire to learn and live a respectable life safely as a teacher of high school algebra. When Sonny learns the consequences about drugs and the law, he feels threatened. 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Abortion :: essays research papers

Glasgow, Scotland. It's cold outside. I'm thinking about a problem. One group of people trying to force their beliefs on others, based on religion. And it seems as though we're regressing. Above, a helicopter flies by. If it continues on its course, it will shortly be over Ireland, where as of this writing, the powers that be are deciding if a 14-year-old girl who was raped by the father of one of her friends should be allowed to leave for Britain to obtain an abortion. She's been ordered not to leave the country for nine months. Fourteen years old. Raped. The issue of an unborn fetus takes on more importance than the fact that the rapist walks free. Extreme, but this is a place where the church influences the government. And when I think of the movements concerning abortion in the United States, it definitely seems as though we're regressing. "My body's nobody's body but mine... You run your own body, let me run mine." At the University of San Diego a few years ago, pro-lifers gathered, while pro-choicers chanted the above. Sides clashed and tension ran high. A banner equating pro-choice ideology with Nazism and Hitler was displayed. "Baby Killers," a little red stop sign said -- a sign held by a well-dressed 3-year-old who sat atop the shoulders of his upper-middle class father. The kid looked confused and frightened. The ominous presence of armed police on horseback would be enough to upset anyone. And I wondered how this child got pulled into this? I wondered how any of us got pulled into this. The fact is that those people handing down decisions on the abortion issue are not the ones who will have to live or die by it. Ten years old. That's the age my child would have been. And I would not be here in Glasgow. I wouldn't be in this band or traveling. And I wouldn't have seen the liberal ways in which other countries we have visited deal with this issue. I wouldn't have been asked to write this piece. The fact that I've been through it on all levels is the only reason I accepted. Perhaps I'll have a child in the future, when I can provide properly. Who knows. But as individuals in this "free" country, we must have the right to choose when that time is right. A couple -- perhaps 15 or 16 years old, maybe 10 years older -- is faced with an unwanted pregnancy; it makes no difference if there is no means of support.