# Case Study: Elijah Heart Center Finance Simulation

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Elijah Heart Center Finance Simulation Casey M. Hancock HCS/405 June 21, 2012 Bryan Webb Elijah Heart Center Finance Simulation The Elijah Heart Center (EHC) Finance Simulation is an online tutorial for Health Care Financial Accounting students. This tutorial teaches students the process of analyzing financial indicators for decision-making in a health care organization. The student plays the role of a senior consultant for a financial consulting firm. Responsibilities for this project are to bridge a working capital, evaluate funding options for acquiring medical equipment, and evaluate funding options for capital expansion. In each scenario the simulator gives the student options for completing said tasks and after choosing is shown…show more content…
The student’s decision saves \$811,249 by the first quarter that is well over target. This reduces the working capital shortfall and enables EHC to increase patient volume. The next decision to make is to decide between two loan options. The student selects loan option two that has a six-month total interest payment of \$53,873 over option one that has a six-month total interest for \$56, 589. Option two is the choice because the \$2,716 savings difference in total interest from option two outweighs the \$1,043 in interest savings from option one. Here the simulator reveals that loan option one is the correct choice. Loan option one is the best choice to solve the working capital shortfall because even though it has a higher interest rate, there is no prepayment limitation and has a total interest payment of only \$32,603 after three months. The Financial Dictionary explains that “prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise” (Financial Dictionary, p. 1,…show more content…
Although the bonds have the lowest cost of issuance among the choices, its Net Present Value (NPV) of \$219 million is lower than the HUD 242. The Business Dictionary defines NPV as “the difference between the present value of the future cash flows from an investment and the amount of investment” (Business Dictionary, p. 1, 2012). The collateral requirement for the bonds is also much higher than the HUD 242. Because the collateral includes escrow on ECH’s gross receivables, ECH possibly may have less control over its future revenue stream. The simulator also took note of the four-year time frame of the expansion project versus the three-year spending limit on the bonds. As one can see through this review of the EHC Finance Simulation, working through the financial challenges in a health care workplace can be daunting. A powerful advantage of a simulation such as this is that there are many terms and situations to become more familiar with. Through these lessons the student knows that the time frame of a loan is just as important as the interest rate. Also the time frame for a piece of medical equipment’s useful life is also as important as its bottom line price or asset position. Finally, when deciding on loan options, one must factor the NPV value as it is of major