Business Plan and Feasibility Analysis - Economic Issues, Financial Analysis, Feasibility Analysis (20-25 pages)

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Stand-Alone Project: Business Plan and Feasibility Analysis

You should begin working on the Stand-Alone Project early in the course. Each lesson provides a benchmark for completing the Stand-Alone Project in a timely manner while working through the course. You will find this information in the “Stand-Alone Project Benchmark” section of each lesson.

The Stand-Alone Project for this course requires you to act in the role of a consultant to a physician who wants to establish “Oakville Open MRI Clinic.” Dr. Hughes, introduced in Assignment #6, is the physician in charge of exploring the development of an Open MRI Clinic, which will be a part of Oakville Hospital. The proposed MRI clinic will be the only “open” MRI operation in Oakville County. There are “open” units in Memphis, which is about 200 miles away, and there are many “closed” MRI facilities in the County. Oakville Hospital has highly regarded neurological and radiology groups. Many aging baby boomers live in Oakville County. There is a shortage of radiology techs needed to staff the Open MRI.

Dr. Hughes wants you to complete a draft of a business plan. The previous consultant completed the Mission Statement, SWOT analysis, and Strategies sections of the Plan. Your function is to draft any applicable economic, budgeting, and financial analysis sections, and to make conclusions and recommendations based upon your analysis. Your business plan should be 20 to 25 double-spaced pages in length, including worksheets and narrative. Your Stand-Alone Project responses should be both grammatically and mechanically correct, and formatted in the same fashion as the project itself. If there is a Part A, your response should identify a Part A, etc. In addition, you must appropriately cite all resources used in your response and document in a bibliography using APA style. (300 points)

NOTE: It may be helpful to revisit Lesson #6 and the articles that discuss the format of a formal business plan. Also, perform sufficient research on Open MRIs to perform the economic analysis for this project. Keep in mind that you are primarily interested in developing the feasibility analysis for this project. You do not need to write an Executive Summary. As previously stated, you do not need to draft a mission statement, SWOT analysis, or devise strategies. However, you are free to develop any other aspect of a typical business plan you find applicable to the facts as stated in this problem or based upon your research.

Part A	Economic Issues: Dr Hughes would like for you to address the economic issues arising from the following. (96 points)
	1.	What type of price elasticity might be applicable to Open MRI services in Oakville County? In other words, is pricing more likely to be elastic or inelastic? Give two (2) reasons for your answer.
	2.	Identify four (4) factors (other than “utility” and “managed care organizations”) that will influence the demand for Open MRI services.
	3.	Identify two (2) factors that will influence the supply (other than “utility” and “managed care organizations”) of Open MRI services.
	4.	How might the concept of utility impact demand for Open MRI services? Identify five (5) potential impacts.
	5.	How would managed care organizations impact demand and supply? Identify four (4) potential impacts.

Part B	Financial Analysis: Dr. Hughes obtained the following information from Memphis Hospital Open MRI Clinic (MHOMC). This information for MHOMC is the most analogous in scope to the clinic he is proposing to start. (104 points) Table 1: Memphis Hospital Open MRI Clinic Income Statement Table 2: Memphis Clinic Comparative Balance Sheet Based on the above information, Dr. Hughes wants you to prepare the following information as attachments to the business plan:

	1.	Prepare a pro forma Income Statement for 2004. Dr. Hughes asks you to assume that revenues and expenses will increase or decrease at the same rates as they did in the period from 2002 to 2003. NOTE: Do not budget for Non-operating Gains/Losses. As a part of your analysis, explain one (1) possible flaw with this methodology.

	2.	Prepare a Budgeted Statement of Cash Flows for 2004. Use the information from the 2002 and 2003 Balance Sheets and Income Statements to develop the statement of cash flows. (Do not use the 2004 pro forma Income Statement). NOTE: You have two unusual reconciling items.
		a.	Place a line item “Other Changes to Net Assets” in the Financing Activities section as a positive adjustment of $32,288.
		b.	Make a Net cash adjustment line item of ($290) (negative adjustment), also in the Financing Activities section. Also note that bad debt expense does not require a cash outflow, so it will be a positive adjustment in the Operating Activities section.

	3.	Ratio Analysis: Use the information from the 2003 Balance Sheet and Income Statement to develop the following ratios. Show your calculations with your answers.
		a.	Profit Margin Ratio
		b.	Return on Assets
		c.	Return on Equity
		d.	Current Ratio
		e.	Days Cash on Hand
		f.	Debt to Equity Ratio
		g.	Fixed Asset Turnover
		h.	Days in Patient Accounts Receivable

	4.	Conclusions: Analyze and form conclusions about the following Oakville Clinic ratios in relation to the industry averages. Describe your conclusions. Base your conclusions on your ratio calculations and the following industry averages.
		a.	Profitability Ratios: Profit Margin, Return on Assets Ratio, and Return on Equity Ratio
		b.	Liquidity: Days Cash Ratio
		c.	Utilization of Assets: Fixed Asset Turnover Ratio and Days in Patient Account Ratio
		d.	Solvency: Current Ratio
		e.	Capital Structure: Debt/Equity

	5.	Break-Even Analysis: Regardless of your previous calculations, assume the following in performing a break-even analysis.
		a.	Fixed costs are $180,000
		b.	Variable costs are $350 per patient
		c.	Reimbursement per patient is $550
		d.	Anticipated volume for year 2004 is 1,200 visits.

		Calculate the breakeven point in 1) Units-patient Visits, and 2) Dollars-Net Patient Revenue. Calculate what the projected profit or loss would be based on anticipated volume.

Part C	Feasibility Analysis: Base your responses to Part C on your economic analysis from Part A, the Pro Forma Income Statement, the Statement of Cash Flows, Ratio Analysis, and the Breakeven Analysis from Part B. Develop a Feasibility Analysis as a part of the Business Plan, which assesses the probability of success or failure for the Oakville Open MRI Clinic. Recommend a course of action that is based upon your analysis. (100 points)
	1.	Are the results of the overall analysis positive or negative? Explain.
	2.	Make a recommendation to proceed with or halt the proposed venture.
	3.	Identify at least six (6) indicators that factored in to your recommendation.