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%

Answer 1

	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

Note1: depreciation is excluded since it is a non-cash expenditure.

Note2: closing cash=opening cash + current year cash flow