1. Your firm reduces its days in receivables from 87 to 67, which generates $3.4 million of new investment funds. Growth rate in new equity will increase because: (please discuss the reason for your choice) 1.Total asset turnover will increase 2.Investment income will increase 3.Both A and B 2. Activity: You have been asked to establish a pricing structure for radiology on a per-procedure basis. Present budget data is presented below: Budgeted procedures: 10,000 Budgeted cost $400,000 Desired profit $80,000 It is estimated that Medicare patients comprise 40 percent of total radiology volume and will pay on average $38 per procedure. Approximately 10 percent of the patients are cost payers. The remaining charge payers are summarized below: Payer Volume% Discount % Blue Cross 20 4 Unity PPO 15 10 Kaiser 10 10 Self-pay 5 40 50%
2. What rate must be set to generate the required $80,000 in profit in the preceding example?