Question

Although financial data are sketchy, an estimate from a construction company indicates that adding bed capacity would cost about $100,000perbed.Inaddition,theratechargedfortheherniasurgeryvariesbetweenabout$900 and $2,000(U.S.dollars),withanaveragerateof$1,300 per operation. The surgeons are paid a flat at $600 per operation. (b) Due to all the uncertainties in government health care legislation, Shouldice would like to justify any expansion within the five-year time period.

Short answer

The answer to this question is described in step1 and step2.

Step-by-step solution

Current bed usage

The image is shown below:

Perspectives on the prices existing at the hospital for 15 beds added for surgery

Income for the 15 added beds each at a value of $2,400 = $36,000 per day

Surgery per Sunday = $800 per day, total $12,000

Cost of room, supplier, and meal = $500 per day, total $15,000

$36,000 - $12,000 - $15,000 = $9,000, this can be the daily income

5 surgeries are conducted per day * 50 Weeks = 1,250 Surgeries

1,250 Surgeries = $11,250,000, this can be the yearly income

Cost of bed for five years = $(1,000,000*45)/5 Years = $900,000 cost of beds annually

Net Income for the hospital = $10,350,000 per annum.

Expansion of hospital

Expanding the hospital supported the return on investment portrays the investment as favorable, the net present value is often ignored since the rate of interest is not given, but this addition is often made.

Other bases of investments exist, to mention in other words, if the stakeholders of Shouldice attempt to perform better, then the investment decision may be made supported by these criteria.