Term Paper on "California Clinics"

Quoted Instructions for "California Clinics" Assignment:

Assignments:

Assignment #3 ***** California Clinics

California Clinics, an investor-owned chain of ambulatory care clinics, just paid a dividend of $2 per share. The firm*****s dividend is expected to grow at a constant rate of 5% per year, and investors require a 15 % rate of return on the stock.

1. What is the stock*****s value?

2. Suppose the riskiness of the stock decreases, which causes the required rate of return to fall to 13%. Under these conditions, what is the stock*****s value?

3. Return to the original 15% required rate of return and assume a dividend growth rate estimate increase to 7% per year, what is the stock value?

4. Explain how each of the four (4) fundamental factors that affect the supply and demand for investment capital, and hence, interest rates, (namely productive opportunities, time preferences for consumption, risk, and inflation) affects the cost of money.

5. Why is risk aversion so important to financial decision making?

6. Explain the three (3) techniques for solving time value problems.

NOTE: You will be graded on the quality of your answers, the logic/organization of the report, your language skills, and your writing skills.

The assignment will be graded using the following rubric:

Outcomes Assessed *****¢ Develop a competence in making financial decisions using net present value, pertinent financial ratios, and break-even analysis.

*****¢ Describe the overall planning process and the key components of the financial plan.

*****¢ Explain why time value analysis is so important to health care financial management.

*****¢ Evaluate the financial statements and the financial position of health care institutions.

*****¢ Use technology and information resources to research issues in health financial management.

Grading Rubric for Assignment #3 - California Clinics

Criteria 0

Unacceptable 20

Developing 30

Competent 40

Exemplary

1. Calculate a stock*****s value at a constant growth rate of 5% and 15% required rate of return. Did not attempt or calculated stock*****s value at required rates with less than 70% accuracy and little of the appropriate information was identified. Calculated stock*****s value at required rates with 70 to 79% accuracy and some of the appropriate information was identified. Calculated stock*****s value at required rates with 80 to 89% accuracy and most of the appropriate information was identified. Calculated stock*****s value at required rates with 90 to 100% accuracy and all appropriate information was identified.

2. Calculate a stock*****s value at a constant growth rate of 5% and 13% required rate of return. Did not attempt or calculated stock*****s value at required rates with less than 70% accuracy and little of the appropriate information was identified. Calculated stock*****s value at required rates with 70 to 79% accuracy and some of the appropriate information was identified. Calculated stock*****s value at required rates with 80 to 89% accuracy and most of the appropriate information was identified. Calculated stock*****s value at required rates with 90 to 100% accuracy and all appropriate information was identified.

3. Calculate a stock*****s

value at a constant growth rate of 7% and 15% required rate of return. Did not attempt or calculated stock*****s value at required rates with less than 70% accuracy and little of the appropriate information was identified. Calculated stock*****s value at required rates with 70 to 79% accuracy and some of the appropriate information was identified. Calculated stock*****s value at required rates with 80 to 89% accuracy and most of the appropriate information was identified. Calculated stock*****s value at required rates with 90 to 100% accuracy and all appropriate information was identified.

4. Explain how each of the four (4) fundamental factors that affect the supply and demand for investment capital, and hence, interest rates, (namely productive opportunities, time preferences for consumption, risk, and inflation) affects the cost of money. Did not attempt or

explained the fundamental factors that affect the supply and demand for investment capital, and hence, interest rates, (namely productive opportunities, time preferences for consumption, risk, and inflation) affects the cost of money with less than 70% accuracy and completeness; omitted major points and/or included irrelevant points Explained some of the fundamental factors that affect the supply and demand for investment capital, and hence, interest rates, (namely productive opportunities, time preferences for consumption, risk, and inflation) affects the cost of money with 70 to 79% accuracy and completeness Explained most of the fundamental factors that affect the supply and demand for investment capital, and hence, interest rates, (namely productive opportunities, time preferences for consumption, risk, and inflation) affects the cost of money with 80 to 89% accuracy and completeness Explained all four (4) fundamental factors that affect the supply and demand for investment capital, and hence, interest rates, (namely productive opportunities, time preferences for consumption, risk, and inflation) affects the cost of money with 90-100% accuracy and completeness

5. Explain why risk aversion is so important to financial decision making Did not attempt or

explained reasons risk aversion is important to financial decision making with less than 70% accuracy and completeness Explained some reasons risk aversion is important to financial decision making with 70 to 79% accuracy and completeness Explained most reasons risk aversion is important to financial decision making with 80 to 89% accuracy and completeness Explained all key reasons risk aversion is important to financial decision making with 90-100% accuracy and completeness

6. Explain the three (3) techniques for solving time value problems. Did not attempt or explained three (3) techniques for solving time value problems with less than 70% accuracy and completeness; omitted major points and/or included irrelevant points Explained some of three (3) techniques for solving time value problems with 70 to 79% accuracy and completeness Explained most of three (3) techniques for solving time value problems with 80 to 89% accuracy and completeness Explained all three (3) techniques for solving time value problems with 90-100% accuracy and completeness

7. Clarity

Did not complete the assignment or explanations are unclear and not organized.

(Major issues) Explanations generally unclear and not well organized.

(Many issues) Explanations generally clear and/or organized. (Minor issues) Explanations very clear and well organized.

(Added helpful details.)

8. Writing ***** Grammar, sentence structure, paragraph structure, spelling, punctuation, APA usage.

Did not complete the assignment or had 8 or more different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage. (Major issues) Had 6 - 7 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage. (Many issues) Had 4 - 5 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage. (Minor issues) Had 0 - 3 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage.