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Answer:
As the CFO of a community hospital, you have been tasked with creating a proposal for the first 3 months of operation for a commercial 24-hour pharmacy within the hospital. To develop this proposal, you need to consider various aspects. Here's a step-by-step breakdown of the points that should be covered in your proposal:
1. Working capital: Include the need for working capital, which will cover various expenses for the first 3 months. This should include:
a. 2 months of startup drug inventory: Discuss the estimated cost of stocking the pharmacy with an appropriate amount of medication for the initial period.
b. Vendor financing arrangements: Explain any arrangements you may have made with vendors to finance the purchase of inventory or equipment.
c. Personnel costs: Discuss the salaries and benefits for the pharmacy staff, including pharmacists, technicians, and other necessary personnel.
d. Renovations: Outline any renovation or construction costs required to set up the pharmacy within the hospital.
e. Disposable supplies: Consider the cost of various disposable supplies needed for the pharmacy's operations, such as gloves, syringes, and other consumables.
f. Cost of equipment: Detail the cost of purchasing or leasing necessary equipment for the pharmacy, such as dispensing machines, computers, and software.
2. Viable options to measure the rate of return: Present two options to measure the rate of return on investment (ROI) for the pharmacy department, based on time value principles. Provide a rationale and justification for each option. Some possible options include:
a. Net Present Value (NPV): Calculate the NPV by discounting the future cash flows from the pharmacy department to the present value, considering the time value of money.
b. Internal Rate of Return (IRR): Determine the IRR, which is the discount rate at which the present value of cash inflows equals the present value of cash outflows. This helps evaluate the profitability of the project.
3. Profitability analysis for 3 years: Prepare a profitability analysis for the pharmacy department for the next 3 years. This analysis should include projected revenues, expenses, and net income. It will help assess the financial viability and sustainability of the department over time.
4. Schedule of assumptions: Include a schedule of assumptions in your proposal. This should outline the key assumptions made when estimating revenues, expenses, and other financial aspects of the pharmacy department. The assumptions should be realistic and based on relevant market data.
5. Feasibility questions from the board: Anticipate questions that the board might ask regarding the feasibility of this proposal. Some possible questions could include:
a. How will you ensure an adequate supply of medication in the pharmacy?
b. What is the expected demand for a 24-hour pharmacy in the hospital?
c. How will you attract and retain qualified pharmacy staff?
d. What are the potential risks and challenges associated with operating a pharmacy within the hospital?
6. Influence of policy changes: Consider how current changes in federal, state, and local policies might influence the decisions related to the pharmacy department. For example, changes in regulations regarding drug pricing or reimbursement policies could impact the financial performance and feasibility of the department. Stay updated with any relevant policy changes that could affect the pharmacy's operations and adapt your proposal accordingly.
Remember, this is a general framework to guide you in creating the proposal. Make sure to conduct thorough research, gather accurate data, and analyze the financial aspects carefully to provide a comprehensive and well-supported proposal.
