Physical Therapy Center Assignment The operation will receive an interest free,
ID: 2610973 • Letter: P
Question
Physical Therapy Center Assignment
The operation will receive an interest free, non-amortizing loan of $ 400,000 from the home office.
The pre-opening start up costs are $71,429 which will be “capitalized” (treated as P,P,& E).
The investment in property, plant and equipment (AKA technology) is $ 285,714 .
Assignment: Prepare the Cash Flow Proforma for 5 years based on the above assumptions and Proforma Results of Operations posted on Angel. What is the ending Cash balance?
Outpatient Therapy Center Financial Proforma-Years Year Year Year Year Year 1 2 3 4 5 5 Yr Total # OF VISITS 2,268 2,940 3,533 3,974 4,783 17,498 Revenue Gross Revenue 907,200 1,223,040 1,528,625 1,787,971 2,238,056 7,684,893 Contractual Allowance (544,320) (726,486) (898,694) (1,040,114) (1,287,900) (4,497,514) NET REVENUE $362,880 $496,554 $629,931 $747,857 $950,157 $3,187,379 Direct Expenses Rent 96,000 98,000 100,000 102,000 104,000 500,000 Common Area Maintenance Charges 24,000 25,200 26,460 27,783 29,172 132,615 Start Up Costs Depreciation 7,143 14,286 14,286 14,286 14,286 64,286 Technology Depreciation 14,286 28,571 28,571 28,571 28,571 128,571 Advertising 12,000 1,500 1,500 1,500 1,500 18,000 Salary 248,976 298,954 335,884 342,884 383,631 1,610,330 Benefits 63,862 83,329 86,154 87,950 98,401 419,697 Vacation Coverage 2,160 2,246 2,336 2,430 2,527 11,699 Extended Leave 1,151 1,197 1,244 5,177 5,384 14,152 Electric 8,000 8,880 9,235 9,605 9,989 45,709 Phone 1,800 1,872 1,947 2,025 2,106 9,749 Repairs & Maintenance 500 1,000 2,000 4,000 8,000 15,500 Total Direct Expenses 479,877 565,035 609,619 628,210 687,567 2,970,308 Indirect Expenses Supplies 454 588 707 795 957 3,500 Laundry 2,563 3,322 3,993 4,490 5,405 19,772 Total Indirect Expenses 3,016 3,910 4,699 5,285 6,361 23,272 TOTAL EXPENSES $482,894 $568,946 $614,318 $633,495 $693,928 $2,993,580 NET INCOME/LOSS $(120,014) $(72,391) $15,613 $114,362 $256,229 $193,799 Income Percentage -33.1% -14.6% 2.5% 15.3% 27.0% 6.1%Explanation / Answer
Note1: depreciation is excluded since it is a non-cash expenditure.
Note2: closing cash=opening cash + current year cash flow
Year1 Year 2 Year 3 Year 4 Year 5 Cash inflow: Cash flow from loan 400,000 revenue 907,200 1,223,040 1,528,625 1,787,971 2,238,056 Total cash inflow 1,307,200 1,223,040 1,528,625 1,787,971 2,238,056 Cash outflow: Start up cost (71,429) Investment in property (285,714) allowance (544,320) (726,486) (898,694) (1,040,114) (1,287,900) Rent (96,000) (98,000) (100,000) (102,000) (104,000) Maintenance charges (24,000) (25,200) (26,460) (27,783) (29,172) Advertising (12,000) (1,500) (1,500) (1,500) (1,500) salary (248,976) (298,954) (335,884) (342,884) (383,631) benefits (63,862) (83,329) (86,154) (87,950) (98,401) vacation coverage (2,160) (2,246) (2,336) (2,430) (2,527) extended leave (1,151) (1,197) (1,244) (5,177) (5,384) electric (8,000) (8,880) (9,235) (9,605) (9,989) phone (1,800) (1,872) (1,947) (2,025) (2,106) repairs (500) (1,000) (2,000) (4,000) (8,000) supplies (454) (588) (707) (795) (957) laundry (2,563) (3,322) (3,993) (4,490) (5,405) total cash outflow (1,362,929) (1,252,574) (1,470,154) (1,630,753) (1,938,972) Net cash flow (outflow) (55,729) (29,534) 58,471 157,218 299,084 opening cash - (55,729) (29,534) 58,471 157,218 closing cash (55,729) (85,263) 28,937 215,689 456,302