Problem:
ABC Hospital decides to acquire 50 new beds, which cost $10,000 each. What is the most efficient financing approach for the hospital to take?
a. Bill Medicare for $500,000 by increasing room charges by $100 per day.
b. Start a capital campaign to raise $500,000 in donations.
c. Issue $500,000 in 10 year notes at 5%.
d. Lease the beds for 5 years under an operating lease for $75,000 per year (paid annually in arrears) with a residual value of $200,000 with an option to enter a conditional sales contract at $45,000 per year (paid annually in arrears) for 5 years.
Note: Show supporting computations in good form.