Part I: Compute the worth of Arcadia Hospital in 2005 using rules of thumb, adjusted book value, and discounted cash flow valuation (for this final method, use the table provided). Assume the cash flow for 2005 is the same as 2006.

Question

1) Rules of thumb:
2) Adjusted book value:
3) Discounted cash flow:

Cash Flow amount
Capitalization Rate
Value
6%
8%
10%
12%

Part II: Compare your findings for each valuation method, and discuss any differences or similarities between the calculated values. What method do you think gives the most accurate picture of the worth of Arcadia in 2005? Explain your answer.

Arcadia Hospital
Statement of Cash Flows-Indirect Method
YE December 31, 2006
(Dollars in Millions)
$ %
Net Income from Operations 55 -12.36%
Add: Deprec / Amort 100 -22.47%
Equals Adjusted Net Income 155 -34.83%

Plus Other Operating Sources/(Uses) of Cash:
Short Term Investments 0 0.00%
Accounts Receivable 300 -67.42%
Inventory 0 0.00%
Prepaids 0 0.00%
Accounts Payable 100 -22.47%
Other Current Liabilities 100 -22.47%
Subtotal Sources/(Uses) of Cash 500 -112.36%

Net Cash Flow from Operations 655 -147.19%

Purchase of Equipment (1,000) 224.72%

Payments on Bonds payable (100) 22.47%

Net Increase/(Decrease) in Cash (445) 100.00%


Cash Account Beginning Balance 100

Cash Account Ending Balance (345)

Net Increase/(Decrease) in Cash (445)

Answer 1

If you were trying to "cut and paste" it does not work here. You must type everything out.

Sra

Answer 2

Axia assignment. Read ch 6 & 7 and refer to appendix C and Arcadia worksheet. The answer is there.