Capital Budgeting

Capital Budgeting Process

FitzVaughn Skeete

November 27, 2011

DeVry University

Professor Jabbour

(Question I) Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps.

The types of debt financing available to non-profit healthcare organizations clued bank term loans, conventional mortgages. FHA-insured mortgages and tax exempt are not only for non-profit organizations, but taxable bonds as well. These steps include: The healthcare borrower updates its capital plan, measures its debt capacity, and attempt to get their affairs in order. The healthcare borrows select the key parties involved in the bond issuance. The healthcare borrow is evaluated by a credit rating agency, and bond is rated by the lending facility. The borrower enters into a loan agreement with the government authority, the issuer of the bonds. The underwriters sell the bonds to bondholders at the public offering price, and trustees provide the healthcare provider with the net proceeds.

(Question II) An alternative to traditional equity and debt financing is leasing. Leasing is undertaken primarily for what purposes?

Traditional equity and debt financing is leasing, which undertakes for four reasons: To avoid the bureaucratic delays of capital budget requests, to avoid technological obsolescence, to receive a better maintenance of services, and to allow for any convenience.

(Question III) Discuss the two major types of leases.

There are two major types of leases: operating and capital. An operation lease is used for service equipment leased for periods shorter than the equipments economic life, which is usually between a few days and a year. A capital lease (financial lease) aims to lease the asset for virtually all of its economical life. The lessee is committed to lease payments for the entire lease period.

(Question IV) Discuss the terms short-term borrowing and long-term financing.

Short-term financing refers to a wide range...