FIN 305 Study Guide - Final Guide: Preferred Stock, Retained Earnings
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Problem 2
You are considering starting a walk-in clinic. Your financialprojections for the first year of operations are as follows”
Revenues (10,000 visits) | $400,000 |
Wages and benefits | 220,000 |
Rent | 5,000 |
Depreciation | 30,000 |
Utilities | 2,500 |
Medical supplies | 50,000 |
Administrative supplies | 10,000 |
Assume that all costs are fixed, except medical supplies andadministrative supplies, which are variable. Furthermore, assumethat the clinic must pay taxes at 30 percent rate.
a. Construct the clinic’s projected P&L statement.
EXPENSES AMOUNT INCOME AMOUNT
Wages and benefits 220,000 revenue 400,000
Rent 5,000
Depreciation 30,000
Utilities 2,500
MedicalSupplies 50,000
Administrative Supplies 10,000
Profit 82,500
TOTAL 400,000 400,000
Profit = 82,500
Tax -24,750
$57,750
b. What number of visits is required for break-even? (Hint: Atbreakeven, there is zero taxable income and hence zero taxes).
Break even point = fixed cost/cont pu
= 257,500/34
= 7573.52
= 7574 visits
c. What number of visits is required to provide you with anafter-tax profit of $100,000?
Profit before tax = (100,000/70) x 100
= 142,857
Number of visits required = fixed cost + profit before tax/contpu
= 257,500 + 142,857/34
= 11,775 visits
Problem 3
Burleson Clinic has fixed costs of $2,000,000 and an averagevariable cost rate of $15 per visit. Its sole payer, an HMO, hasproposed an annual capitation payment of $150 per each of its20,000 members. Past experience indicates the population servedwill average two visits per year.
a. Construct the base case projected P&L statement on thecontract.