Business Essay

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Chapter 16: Description of Capital Expenditure Proposals Scoring System Worthwhile Hospital has a total capital expenditure budget for next year of five million dollars. Of this amount, three million is already committed as spending for capital assets that have already been acquired and are in place. The remaining two million dollars is available for new assets and for new projects or programs. Worthwhile Hospital typically divides the available capital expenditure funds into monies available for inpatient purposes and monies available for outpatient purposes. This year the split is proposed to be 50-50. The hospital’s CFO is also proposing that a scoring system be used to evaluate this year’s proposals. She has set up a scoring system that allows a maximum of five points. Thus the low is a score of one point and the high is a score of five points. In addition to the points earned by a funding proposal, the CFO will allow one “bonus point” for upgrading existing equipment and one “bonus point” for funding expansion of existing programs. Exercise 16-A: Capital Expenditure Proposals Jody Smith, the Director who supervises the Intensive Care Units, wants to secure as much of the one million dollars available for inpatient purposes as is possible for the ICU. At the same time Ted Jones, the Director who supervises the Surgery Unit, also wants to secure as much of the one million dollars available for inpatient purposes as is possible for his Surgery Unit. A) Given the CFO’s new scoring system, how should Jody go about choosing exactly what to request? Jody Smith should focus on either upgrading or replacing the equipment used currently. By upgrading she is limiting the cost of equipment as opposed to buying completely new equipment to add to the already existing equipment. By upgrading the equipment she will be able to offer more to the
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