Analyzing Financial Indicators Essay

697 WordsJul 6, 20113 Pages
Analyzing Financial Indicators for Decision Making Patricia Hand HCS 571/ Lena Watson, Instructor June 6, 2011 Financial Indicators Decision Making Simulation Form Date: June 6, 2011 What are the potential risks for each choice? The potential risk for the Tax exempt revenue bond is the collateral requirement of the escrow on gross receivables for EHC. If there is a decline in the inpatient population, and low or slow…show more content…
The collateral requirement of the escrow of EHC gross receivables, and EHC would have less control of its revenue because part goes to the lender. Not requiring a first mortgage on the facility as a collateral requirement, if EHC defaults on the loan the tax exempt bond would be paid before anyone. The IRS accepts the funds to be use within three years but EHC will not finish the expansion until the four years. The face value of the bonds will have to be repaid to lender at maturity of the loan. HUD 242 Insurance Program The advantage of this funding is the NPV is the highest of the three at $221,221.000 for the $75 million dollar investment, and has the lowest interest rate (3.90%) of the three choices. Funding enables the hospital debt to be finance as an investment grade bond either (AA/AAA) which lowers the borrowing rate in the capital market. The bonds are callable in eight years so EHC will pay $20,400.000 in interest and can buy back the bonds if the interest rate drops and have bonds reissue at the lower interest rate. No deadline to use the funds and no foreclosure fees. The disadvantages of this funding are the cost of issuance is the highest of the three choices ($725,250.000). The bonds are not recallable before eight years. The face value of the bonds has to be repaid to lender at
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