Financial Analysis Report: Green Care Hospital Cafe Investment Options

This report, prepared for the Board of Directors of Green Care Hospital, analyzes three options for the hospital's cafe: doing nothing, leasing to an external operator, or modernizing and running it internally. The report employs investment appraisal techniques, particularly Net Present Value (NPV), to evaluate the financial viability of each option. The analysis considers financial parameters such as cash flow growth rates, interest rates, and the cost of capital, recommending modernization as the most beneficial choice with the highest NPV. Furthermore, the report explores non-financial considerations, including the availability of skilled personnel, customer preferences, and the importance of marketing strategies. Evidence-based recommendations are provided, emphasizing the use of investment appraisal tools, suitable pricing methods, and internal recruitment to ensure the cafe's success. The conclusion highlights the importance of project evaluation methods in business decision-making, reinforcing the benefits of cafe modernization for Green Care Hospital's financial performance.

Finance for Managers

Table of Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
1. Critically identify the suitable option for the hospital by evaluating all the parameters. . .3
2. Analyzing the financial areas that hospital needs to consider for taking decision.............4
3. Critically evaluating the options that are available to the hospital on the basis of non-
financial considerations..........................................................................................................4
4. Sating the evidence based recommendations.....................................................................5
CONCUSION............................................................................................................................5
REFERENCES...........................................................................................................................7

To,
Board of Directors, Green care hospital
Date: 7th December, 2016
INTRODUCTION
In the business organization, manager has responsibility to make in-depth evaluation
of all the projects which are available to them. This in turn helps business organization in
making selection of the suitable project that aid in the growth and success of it. The present
report will provide information about the financial and non-financial aspects that care unit
needs to consider while making selection of the proposal.
MAIN BODY
1. Critically identify the suitable option for the hospital by evaluating all the parameters
Specifically, there are mainly three options available to the care unit though which it can
reduce the financial constraints to the large extent as follow:
Option 1 Do nothing with the café and it will be ran
by the existing volunteers.
Option 2 Lease out the café to either Starbucks or
local café owner such as Greasy Joe’s.
Option 3 Modernization of café and then it would be
run by the existing catering department
From the investment appraisal analysis it has been assessed that third option will prove to be
more beneficial for the care hospital. The rationale behind this, net present value of third
option is £8,08,251. On the other side, if Green care hospice gives café to Starbucks on lease
then NPV of such proposal is 706625. Further, if leasing opportunity will be offered to local
café owner then NPV is £737348. Hence, by considering such aspect it can be said that care
enterprise needs to lay emphasis on the modernization of café. This in turn helps hospice in
getting the desired level of financial outcome or success. Moreover, NPV method of capital
budgeting offers highly realistic solution by taking into accounts the time value of money
concept (Fields, 2016).
Parameters or assumptions undertaken for the evaluation are as follows:

 Growth rate of the cash flows is assumed on the basis of market trend and analysis.
 Interest rate is 10% when loan is taken for 2-3 years.
 Further, when property is provided at lease for the period of 10 years then cost of debt
will be 6%.
 Cost of capital will be 10%.
2. Analyzing the financial areas that hospital needs to consider for taking decision
At the time of making section of the proposal from several Green care unit needs to consider
financial aspects. The reason behind this, each action of the business unit has high level of
influence on both monetary and non-monetary aspects (Banks, 2015). Thus, management of
the firm needs to make assessment of cost of capital, debt and other aspects while making
section of the proposal are as follows:
 On the basis of the outcome of project evaluation if Green care unit selects third
option then it requires fund for the purpose of modernization. In this, by taking loan
from the financial institution care unit can meet its monetary requirement to the large
extent. Thus, on the basis of collateral security hospice can generate fund. However,
in bank loan interest rate which is charge by the institution impose high cost in front
of the business entity. Besides this, such source also has periodical cost in the form of
installment (Carvalho, Meier and Wang, 2016). Hence, care unit needs to make focus
on assessing other sources which in turn helps in making balance in financial of the
care unit.
 Besides this, care unit also needs to make evaluation of the cash flows by taking into
account the suitable discounting factor or cost of capital. This in turn helps business
organization in assessing the extent to specific project will be financially viable or
profitable (Petersen, Kushwaha and Kumar, 2015). Hence, such evaluation and its
outcome provide high level of assistance to the firm in making effectual decision.
3. Critically evaluating the options that are available to the hospital on the basis of non-
financial considerations
On the basis of the financial evaluation third option will aid in both productivity and
profitability of the hospice. However, along with the financial considerations, non-financial
aspects also have high level of impact on the decision making of care unit are enumerated
below:
 On initial level, Green care hospice needs to make assessment of the aspect that
enough inventories of human resources are available within the catering department

or not. Moreover, to ensure the smooth functioning of café care enterprise requires
more personnel which are highly skilled and competent. The reason behind, hygiene,
quality, taste and service level has high level of impact on the customer satisfaction
(Ibrahim, Dumas and McGuire, 2015). In the way, by evaluating such aspects both
hospice and catering department would become able to run café without facing any
difficulty or issue.
 Besides this, Green care unit also needs to consider the needs, wants and expectation
of the customers while developing the promotional mix. Now, preferences and taste of
the customers are getting changed with the very high pace (Bernroider and Mitlohner,
2015). Thus, company needs to consider all such aspects while framing strategies and
policies regarding it.
4. Sating the evidence based recommendations
 It is recommended to the management of hospice to undertake investment appraisal
tools and techniques to assess the viability and return associated with the proposed
investment.
 Besides this, it is advised to the management of hospice that assesses and undertakes
suitable pricing method for decision making (Francis and et.al., 2015). Hence, by
setting the suitable prices hospice would become able to recover the cost and thereby
become able to get desired profit margin.
 Management team of hospice also needs to make focus on the internal recruitment
strategy (Anderson and et.al., 2015). This in turn enables hospice to ensure better
management in café with the help of highly skilled and talented personnel.
CONCUSION
From this report, it has been concluded that project evaluation methods assist business unit in
determining the suitable pathway which contributes in the success of it. Besides this, it can be
inferred that by modernizing the café Green care hospital can improve its financial position
and performance to the large extent.

REFERENCES
Books and Journals
Anderson, D. R. and et.al., 2015. An introduction to management science: quantitative
approaches to decision making. Cengage learning.
Banks, E., 2015. Finance: the basics. Routledge.
Bernroider, E. W. and Mitlohner, J., 2015. Characteristics of the multiple attribute decision
making methodology in enterprise resource planning software decisions. Communications
of the IIMA. 5(1). p.6.
Carvalho, L. S., Meier, S. and Wang, S. W., 2016. Poverty and economic decision-making:
Evidence from changes in financial resources at payday. The American Economic Review.
106(2). pp.260-284.
Fields, E., 2016. The essentials of finance and accounting for nonfinancial managers.
AMACOM Div American Mgmt Assn.
Francis, B. and et.al., 2015. Gender differences in financial reporting decision making:
Evidence from accounting conservatism. Contemporary Accounting Research. 32(3).
pp.1285-1318.
Ibrahim, B., Dumas, C. and McGuire, J., 2015. Strategic decision making in small family
firms: an empirical investigation. Journal of Small Business Strategy. 12(1). pp.80-90.
Petersen, J.A., Kushwaha, T. and Kumar, V., 2015. Marketing communication strategies and
consumer financial decision making: The role of national culture. Journal of Marketing.
79(1). pp.44-63.

Appendix
Discount rate 10%
Table 1: Option 2 sensitivity analysis when interest rate reduced at 10%
Years 0 1 2 3 4 5 6 7 8 9 10
10% 1 91% 83% 75% 68% 62% 56% 51% 47% 42% 39%
1,15,0
00 pa
1,04,5
45
95,04
1
86,40
1
78,54
7
71,40
6
64,91
5
59,01
3
53,64
8
48,77
1
44,33
7
1,20,0
00 pa
1,09,0
91
99,17
4
90,15
8
81,96
2
74,51
1
67,73
7
61,57
9
55,98
1
50,89
2
46,26
5
Option Two Total Net Present Value
Starbucks 7,06,625
Greasy Joe's 7,37,348
Table 2: Option 2 sensitivity analysis when interest rate reduced at 10%
Years 0 1 2 3 4 5 6 7 8 9 10
10% 1 91% 83% 75% 68% 62% 56% 51% 47% 42% 39%
PV of
costs
3,71,5
06
95,00
0
40,90
9
37,19
0
33,80
9
30,73
6
27,94
1
25,40
1
23,09
2
20,99
3
19,08
4
17,34
9