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Case 13 Southeastern Specialty, Inc. - Essays

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1. Summary of Case

2.0 Definition Sheet – Quantitative Hospital Information ( Will include summary of case)

Definition | Water Perfusion | Solid State Technology | Number | 3 machines (one to be replaced) | 0 | Utilization | 600 Manometry Tests Per year (200 per machine) | Possibly 350 stand alone + 400 of two working water perfusion machine | Net Reimbursement | $250 per test | $250 per test | Operating Cost per test | Old System - ($150 Labour, $30 for medical supplies, $15 for administrative)New System - ($150 Labour, $15 for medical supplies, $10 for administrative) | ($150 Labour, $30 for medical supplies, $15 for administrative) | Admission classification | Inpatient – one day | Outpatient (frees up one bed day) | Bed Day costs | Cost is $520 but return is only $40 lose $480 | Net Saved +$480 | Costs of new machine | $25,000 + catheters (9*500) | $25,000 + catheters (9*6000) | Lifespan of machines | 5 | 5 | Expected Utilisation | 200 per machine (base) | 200 + (50-150)Max 350Min 250 | Freed up bed days | | Max 175Min 80 | Inflation Rate | 3% | 3% | Differential Risks Adjusted | +/- 3% | +/- 3% | Salvage Value | 0 after 5 years ($10000 after 3 years) | | Corporate Cost of Capital | 10% | 10% |

PROCESS: Section 1: Quantitative Analysis 1. Step 1 – Estimate the project cash flows Excel Sheet 1 and 2 a. Capital outlays – cost of purchase of capital b. Operating cash flows c. Terminal Cash flows 2. Step 2 - Profitability Analysis or Return on Investment (ROI) analysis focuses on projects financial return d. Returns can be measured using NPV (in money or dollar terms) Excel sheet 1 and 2 e. Internal Rate of Return (IRR) measures in percentage term – Excel Sheet 3 and 4 3. Project Risk Analysis – Quantitative techniques for assessing a projects stand alone risk f.

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