Purchase Solution

Finance: Relevant cost, oppurtunity cost.

Not what you're looking for?

Ask Custom Question

An administrator at Saint Jude Hospital is considering how to use some space made available when the outpatient clinic moved to a new building. She has narrowed her choices, as follows:

a. Use the space to expand laboratory testing. Expected future annual revenue would be $330,000; future costs, $290,000.
b. Use the space to expand the eye clinic. Expected future annual revenue would be $500,000; future costs, $480,000.
c. The gift shop is rented by an independent retailer who wants to expand into the vacated space. The retailer has offered $11,000 for the yearly rental of the space. All operating expenses will be borne by the retailer.

The administrator's planning horizon is unsettled. However, she has decided that the yearly data given will suffice for guiding her decision.

Tabulate the total relevant data regarding the decision alternatives. Omit the concept of opportunity cost in one tabulation, but use the concept in a second tabulation. As the administrator, which tabulation would you prefer if you could receive only one?

Purchase this Solution
Solution Summary

The problem deals with problems in health care finance: opportunity cost and relevant data.

Solution provided by:
Chidi Ngene, M. Sc.
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
Recent Feedback
  • "Thank you."
  • "thank you Chidi Ngene.. if you have any APA references would be great"
  • "Thank you so much for your help, your explanations were easy to understand and apply!"
  • "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
  • "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"
Purchase this Solution
Free BrainMass Quizzes
Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

View More Free Quizzes
Related BrainMass Solutions

  • Arbitrage Oppurtunity Problem

    The investor should buy B and finance the purchase by short selling A and borrowing at the risk-free asset. This posting gives solution to a arbitrage oppurtunity problem, given the beta and expected rate of return for two securities.

  • Finance:Earnins per share calculation.

    The problem set deals with calculating the Earnings per share for an investment oppurtunity.

  • Relevant costs and Opportunity costs - a discussion

    Here, the opportunity cost is the rent revenue lost and hence is relevant in decision making. Reference: Brigham, E.F. & Ehrhardt, M.C. (2009). Corporate finance: A focused approach.

  • Question about Marginal Cost of Capital

    Thus cost of capital is used to evaluate the project. It is also know as discount rate. We measure marginal cost of capital because we want to measure the cost of new capital used to finance new investments.

  • Reading Financial Statements for Berkshire

    Analyze the economic, business, and competitive background in which the financing occurred, and identify cost and risk trade-offs: Relevant information from 10Q: The increase in revenues for the first nine months of 2005 over 2004 from manufactured

  • Internal Guidelines for a Finance Department

    For each reason in both list provide a reason why the item is relevant or not relevant The list of items that are considered relevant Repair expense Cost of new copier machine Installation expense The list of items that are considered not

  • Relationship Between Relevant Costs & Incremental Costs

    In this case, the cost is considered a relevant cost because the factory or equipment is essential to the decision that is being made.

  • Corporate Finance and Cost of Capital

    Its cost of equity is 16 percent, and the cost of debt is 9 percent. The relevant tax rate is 35 percent. What is Mullineaux's WACC?

  • Business Related Decision Making

    A relevant cost must cover the future and not the past. Since the cost has been incurred last year it is no longer relevant.

View More Related Solutions