Business of Radiology 101

Scenario: Gamble your Cash

When making any financial forecast, it is important to account for the time value of money to assure confidence in the model's predictions. Understanding the concepts of present and future value are an entry into understanding the function of net present value. If you have not visited the sections of this activity which define and discuss these concepts, please click on these now to familiarize yourself.

• Look at ROI and NPV at year 4. These calculations are positive and negative, respectively. Why?
• EXPLAIN

• Input different values for discount rate. At what discount rate does Year 4 NPV approach zero?
• EXPLAIN

*  all values represent 1,000s of dollars.
			Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Net Revenues	Δ
Cost of Sales
Operating Expenses	Δ
Operating Profit (EBIDAT)
Interest Expense
Earnings before Deprec, Amort & Tax (EBDAT)
Depreciation Expense
Tax
Net Income
Cash Flow (cumulative)
Cash Flow (annual)
Net Present Value of Cash Flow	discount rate
Return on Investment
Acquisition Cost			Price	Renovation	IT / PACS	Sales Tax	TOTAL
		$
Scanner Useful Life (yr)
Scanner Residual Value (% of new price)
Financing (Loan) Details			Money Down	Principal	Rate	Term (yr)
	Down Payment
Interest Payment (annual, not monthly)				Year 1	Year 2	Year 3	Year 4	Year 5