Capital Budget

Use an Excel sheet and paper.
Complete (as clarified below): a. Financial factors and measures.
b. Nonfinancial factors such as (1) ethical responsibility, (2) quality of care issues, (3) opportunity costs associated with alternative uses of $4.5 million, (4) physician morale, and (5) whether a community hospital should
be run like a business.
c. Measures that could be taken to check for overly optimistic or pessimistic estimates.
Part (a): To be completed in Excel with formula driven answers so that all answers can be traced for correctness. Compute Payback Period, ROI and NPV – Show all calculations for the supporting calculations. I
will need to be able to see/trace all computations.
Parts (b) & (c): Based on the instructions: • You will write a persuasive “argument” paper in your role as either a hospital administrator or physician, your choice. •

The potential investment in the Dialysis center will be brought before the board, where you will have a chance to state your case. • Summarize the investment and address both the financial factors you found in part
(a) • and any non-financial factors (as suggested in part b and/or others you found interesting and pertinent). • Per part c, you also should address any concerns the board might have about the validity of the estimates, and what might be available to them to be assured they are fairly presented.
Remember that your goal is to apply and “sell” the accurate financial and non-financial evidence that will sway the board to invest or not invest, depending on the role you have chosen. Remember that although
results of the numbers are strong, the non-financial factors can be powerful, as well.



Sample Solution