In your memo, give three new employees directions for starting the computer and opening a word processing document. The employees’ names are: Stacy Shoe, Allen Sock, Emma Johnson.

As the director of pharmacy for CMC, you have been experiencing an increase in drug cost of approximately eight to ten percent per year for the past three years. The annual pharmacy drug cost has increased from $10,300,000 to $16,800,000 in the past five years. The hospital is experiencing an increase in drug cost even though actual drug usage has remained stable.

Along with the increase in drug cost, drug related errors have also increased. Patient safety has become an even more serious issue. As you know, patient safety is the number one item on the national health care agenda for the next several years.

At the hospital the number of dispensing errors has increased by two percent during the past twelve months. The registered nurses who are administering the drugs have discovered many of the dispensing errors; however, the ones not discovered resulted in patients getting the wrong drug, wrong dosage, and/or the wrong frequency. When the overall drug error rate was analyzed, it was found that dispensing errors in the pharmacy were the number one cause. The overall drug error rate had increased from three percent to five percent.

Fortunately most of the dispensing errors were discovered before the medications were administered to the patients. When the incorrect drugs were administered, it resulted in adverse effects in three cases. One patient received the right medication but the wrong dosage because the medication label was incorrect. This patient had to be admitted overnight to the Intensive Care Unit for intense cardiac and respiratory monitoring. The patient stayed in ICU for approximately twenty four hours. Another patient received the wrong medication on the day of planned discharge and had to remain in the hospital for an additional day, though only for observation. In the third case, the patient had reported that he was allergic to a certain category of drugs, but nonetheless received a drug of that type. He had an adverse reaction–a rash–which delayed his discharge by one day.

On the basis of your understanding of the above case study, express your views on the following:

• What measures should be adopted to reduce the overall drug error rate in the hospital?
• What special benefits should be given to the patients who have suffered due to negligence by the hospital staff for wrong drug administration and other reasons?
• In your opinion, should the hospital staff who were responsible for the dispensing errors be held personally liable for the errors? Why or why not?

Assume that your company is considering the replacement of an automated milling machine with one of the new machines offered by three different manufacturers.  Each of the three machines under consideration is expected to have an economic life of five years and will result in greater daily production capacity and therefore increased sales volume. The increased volume will require an increase in working capital during the first year to a level that will remain constant until the end of the five years.  The decision of which specific machine to select will depend on a net present value analysis.  The old machine has reached the end of its estimated useful life and can be sold at the salvage value that was projected when the machine was first installed.

Listed below are factors that may be essential for inclusion when estimating project cash flows.  The factors may be required to correctly calculate either the initial investment, the operating cash flows, or the terminal value that would be analyzed to determine the net present value of the project.   It is also possible that certain factors could be used in more than one of the three categories of cash flow.  Another possibility is that the factor listed is not relevant to cash flow estimation for this specific scenario.

Your task is to identify whether the factor would be included in the calculation for the initial investment, or the operating cash flow, or the terminal value, or is not relevant to this decision.  You must also explain whether failure to appropriately include the factor in the calculation would result in overstating or understating the net present value of the project.

FACTORS
Purchase price of capital asset
Incremental annual depreciation expense
Total company sales revenue    
Cash realized from sale of the old machine at its estimated salvage value    
Interest on the loan used to finance the asset purchase
Total annual depreciation expense         
Increase in working capital
Decrease in working capital
Total net income before tax
Incremental net income before tax
Marginal income tax rate
Investment tax credit
Cost of shipping and installing the new equipment

Directions and Grading Criteria

To complete this assignment, you are to develop a Powerpoint presentation. 

**You should create  1-3 slides that identify the factors used to  determine the initial investment,  2-5 slides that identify the factors used to  determine the operating cash flow estimates, and  1-3 slides that identify the factors used to   determine the terminal value estimate.  (4 slides min – 11 max following criteria listed)

You must also indicate on the slides whether failure to appropriately include the factor in the calculation would result in overstating or understating the net present value of the project.  Additional explanations or comments should appear in the speaker notes for each slide. 

APA standards for writing style must be applied to the speaker notes.  Factors that are not relevant to the NPV calculation should not be included on any slide.

By Wednesday, July 22, 2015

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