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. ($655 million)
1) Rules of thumb:
2) Adjusted book value:
3) Discounted cash flow:
Cash Flow amount
Capitalization Rate
6%
8%
10%
12%
Value
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.
I need help its due soon and I have no clue how to do this!
Please help me!!
rules of thumb: (twice annual revenues or $568 million x 2)=1,136 million
Adjusted bood value:(owner's equity)=7,900 million
discounted cash flow:
vo=cf/r
Do your own homework. The rest of us earned our degrees
Everyone needs help sometimes but I feel people should not ask for answers to assignments. USe other examples.
To "Student"
I am so proud of you Einstein! Guess what snob? I earned mine to! Did you ever think of assisting this person by giving examples? What is the point of you coming on here if not to help people? Why don't you go clean up your trailer or find out where your husband/wife is loser?
Did you know the questions you posted word for word is proprietary? You need to read the textbook, or ask your instructor for assistance.
These students have to ask for help because the instructor and text books to this assignment do not go into enough detail or isnt explained enough leaving people to have to search to get an idea.
To the people that are bashing students looking for help: Why are you on here if you were not looking for help yourself?? A person can have mutiple degrees and if you really do this site showing the kind of statements you make shows how extremely ignorant you are. Sometimes a person just needs pointed in the right direction, a lot of the time you do not get enough detail from online school and are just looking for a little more. If you do not like these kind of sites STAY OFF OF THEM!!!!
I go over and above to provide my students with support and answer their questions. I too am tired of the cheating and plagiarizing. There is no reason to do this. I am available by email and even give my home phone.
Sometimes people look for help to make sure they are going in the right direction not to cheat.
To compute the worth of Arcadia Hospital in 2005 using the three valuation methods (rules of thumb, adjusted book value, and discounted cash flow), follow these steps:
1) Rules of Thumb:
The "rules of thumb" method provides a rough estimate based on common industry standards. Typically, a rule of thumb for valuing a hospital is to use a multiple of its revenue or earnings before interest, taxes, depreciation, and amortization (EBITDA). Let's assume we use a revenue multiple of 0.8.
Revenue in 2005 for Arcadia Hospital: $655 million
Estimated value using rules of thumb: $655 million * 0.8 = $524 million
2) Adjusted Book Value:
The adjusted book value approach considers the hospital's net assets, which are adjusted to reflect their market value instead of their historical cost.
Book value of Arcadia Hospital in 2005: This information is not provided. If you have the hospital's financial statements for that year, you can compute the book value by subtracting the accumulated depreciation from the original cost of the hospital's assets.
Once you have the book value, you can adjust it using a market-to-book ratio. This ratio compares the market value of similar hospitals to their book values. Let's assume the market-to-book ratio is 1.2.
Adjusted book value = Book value * Market-to-book ratio
3) Discounted Cash Flow (DCF):
The discounted cash flow method calculates the present value of the hospital's expected future cash flows. However, to use this method, you need to be provided with the cash flow projection for each future year.
Based on the information given, we are provided with the 2005 and 2006 cash flow, which is $655 million. Since the cash flow for 2005 and 2006 is the same, we can use the $655 million value for both years.
To calculate the DCF value, we use the following formula:
DCF value = Cash Flow / (1 + Capitalization Rate) + Cash Flow / (1 + Capitalization Rate)^2 + ...
You need to calculate the DCF value using the provided capitalization rates of 6%, 8%, 10%, and 12%.
Now, let's compare the findings for each valuation method:
Rules of Thumb: $524 million
Adjusted Book Value: This depends on the given book value and market-to-book ratio, which are not provided.
Discounted Cash Flow: Calculate the DCF value using the provided cash flow and the given capitalization rates.
To determine which method provides the most accurate picture of the worth of Arcadia in 2005, you need to consider a few factors:
- Rules of Thumb: This method can provide a rough estimate but may not consider specific unique factors of the hospital, so it might not be the most accurate.
- Adjusted Book Value: This method considers the market value of assets, but it depends on the accuracy of the book value and the market-to-book ratio.
- Discounted Cash Flow: This method incorporates the time value of money and future cash flows, making it more comprehensive. However, it heavily relies on accurate cash flow projections and an appropriate choice of the capitalization rate.
Consider these factors and the availability of accurate data when deciding which method gives the most accurate picture of the worth of Arcadia Hospital in 2005.