Dermatology Associates of Linwood (DAL):
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You are the practice manager for Dermatology Associates of Linwood (DAL): a multi-physician dermatology practice. Recently, the physician partners have decided to invest in purchasing an existing dermatology practice in a neighboring city, which will be operated under the group’s name. They have asked you to research the financial logistics of acquiring this new location. The practice is fully-staffed, however the (one) physician owner is retiring, leaving an opening for a new physician to be hired. In keeping with DAL’s standard of care, several new expenses will be incurred with the acquisition, including: access to DAL’s electronic medical record system, a Fraxel laser, and new furniture for the waiting room area.
Draft a proposal, addressing the following items in a Word document:
- Summary of estimated primary startup costs (create a table to illustrate and organize this information)
- Financing options
- Summary of when the practice will reach profitability. Explain the finance principle you can use to make this determination. (You do not need to perform the calculations, but you do need to explain how to estimate and assess profitability).
- Include a minimum of three references, APA style, on a separate page.
Dermatology Associates of Linwood is moving forward with the acquisition of the second practice discussed in Assignment 1. You have been meeting with Sharon, the second location’s practice manager, acquainting her with DAL’s operational standards. Sharon expressed concern about the immediate purchase of the Fraxel laser.
Sharon explained that the former practice physician-owner avoided purchasing one, because the return was not worth the investment. With the purchase price averaging $25,000, you definitely understand Sharon’s concern, but you also know Fraxel treatments at DAL are one of the leading services contributing to your overall revenue. This is primarily due to the fact that Fraxel treatments are classified as a cosmetic procedure, with payment required upfront from the patient.
- In an Excel document, use one of the concepts presented in chapter 9 to show Sharon why the investment would be profitable.
- Assume the opportunity cost of capital is 12%.
- Include cash flows for six months
- Assume the number of treatments you will need to perform each month.
- The treatment price at DAL’s existing clinic is $1,200. You will need to lower this price point to be more appealing to the new practice’s patient base.
- Below your calculation, insert a text box and provide the rationale for using the method you used, as well as the new price you set for the treatment. Word it as if you are speaking to Sharon, explaining how profitability is determined.
- Include any references in APA style in a textbox at the bottom of your Excel document.