Your nursing home defines output as a patient day.

Your nursing home defines output as a patient day. Its present volume is 26,000 patient days. The average cost per day is $90.00. Present revenues and costs are presented

Revenues:

Charge Patients (6,000 Patient Days) $750,000

Fixed-Price Patients (20,000 Patient Days) 1,800,000

Total Net Revenues $2,550,000

Costs:

Fixed Costs $1,170,000

Variable Costs ($45/PD) 1,170,000 Total ($90/PD) $2,340,000

Net Income $210,000

What is the breakeven in patient days for this nursing home, assuming no profit is required?

If volume goes up 10 percent to 28,600 patient days and payer mix is unchanged, what will net income be?

Dublin Medical (DM), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Arlington Corporation, a young firm with a high growth rate of earnings. The acquisitions analysis group at DM has produced the following table of relevant data: Table belowDM's analysts estimate that investors currently expect growth of about 6% per year in Arlington's earnings and dividends. They assume that with the improvements in management that DM could bring to Arlington, its growth rate would be 10% per year beginning one year from now with no additional investment outlays beyond those already expected.

Dublin Medical Arlington

Earnings per share $3.00 $2.00

Dividend per share $3.00 $.80

Number of shares 200 million 10 million

Stock price $30 $20

What is the expected gain from the acquisition?

What is the net present value (NPV) of the acquisition to DM shareholders if it costs an average $30 per share to acquire all of the outstanding shares?

Would it matter to DM's shareholders whether the shares of Arlington stock are acquired by paying cash or DM stock?