Pearland Medical Center’s board recently decided to investigate ways to increase revenues. The organization has the benefit of different revenue streams, including patient revenue and returns on investments. Additionally, the Center has just borrowed $1,000,000 on a five-year loan with annual payment term at a 12 percent rate. The first payment will be due one year from now. This assignment has two parts:
Part 1: Amortization Schedule
Construct the amortization schedule for this loan.
How do the interest payment, principal payment, and total payment change when a loan is amortized?
Part 2: Investments
Suppose the board were going to invest in an ordinary annuity requiring a payment of $10,000 over the next five years with an interest rate of 5%. What is the future value of this ordinary annuity investment?
The board is considering other options for investing as well. For example, they want to double their investment of $70,000 over the next 12 years by using conventional securities with a projected return of 6%. Does the present value of the investment indicate that this is possible?
What criteria should you examine in considering annuities? Include the common characteristics of variable annuity and equity-indexed annuity in your response.
Length: 3 pages, 3 cited sources from required reading
Anonymous. (2012). Hospital financing options for the future. Healthcare Financial Management, 66(8), 1-8.
Anonymous. (2012). Hospital perspectives and capital planning debt management. Healthcare Financial Management, 66(1), 1-2.
Avery, A. E., Flaherty, S. M. V., & Rhee, M. (2011). Fortifying the payback period method for alternative cash flow patterns. Journal of Financial and Economic Practice, 11(2), 1-9.
Juhasz, L. (2011). Net present value versus internal rate of return. Economics & Sociology, 4(1), 46-53.
Kaplan, H. L., & Singh, A. (2009). The opportunity and “duty” to restructure nonprofit health care debt. American Bankruptcy Institute Journal, 28(5), 14, 66-68.
McFarlane, A. (2013). Refinancing hospital loans. Journal of Policy Development and Research, 15(2), 273-282.
U.S. Securities and Exchange Commission. (2016). Annuities: What are annuities? https://investor.gov/introduction-investing/basics…