S.

Saravanan
Developed By
These materials are supported, in part, by the International Eye Foundation with assistance from the U.S. Agency for International Development
Cooperative Agreement No.: FAO-A-00-99-00053-00.
Comments & Suggestion
Faculty Member
Lions Aravind Institute of Community Ophthalmology
Madurai - 625 020, India
Aravind Eye Care System
Investment Analysis Tool
Home Introduction IAT Phaco IAT Yag IAT Cash Flow Glossary Help
Aravind Eye Care System
Cooperative Agreement No.: FAO-A-00-99-00053-00.
Name of the Hospital
With this tool you can:
* Find the pay back period for the equipment based on the workload and charges
4) Consultants involved in resource mobilization and utilization for eye care delivery
Instruction for use:
Kindly open and print the following Manual in Word document - this manual will guide you to use this program.
Manual for IAT
* Estimate the price/charge for the patients? Whether to charge at the market price or based on the actual cost (cost analysis)?
* Find the Profitability & feasibility of purchasing a equipment
* Estimate the annual patient load required to pay back the loan in a given period of time (1year, 2 year, etc)? Or estimate how many patients should the hospital mobilize to effectively utilise the
procured equipment?
Indented User:
1) Any hospital planning to purchase Phaco/yag.
2) Funding agencies to support the capital purchases.
3) Individuals and private practitioners
Rs.
1,000,000
50,000
50,000
50,000
1,150,000
8 Years
10%
Cost Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
24,000 24,000 26,400 29,040 31,944 35,138 38,652 42,517 46,769 - -
2,000 2,000 2,200 2,420 2,662 2,928 3,221 3,543 3,897 - -
10,000 10,000 11,000 12,100 13,310 14,641 16,105 17,716 19,487 - -
10,000 10,000 11,000 12,100 13,310 14,641 16,105 17,716 19,487 - -
1,250 168,750 204,188 247,067 298,951 361,731 437,694 529,610 640,828 - -
214,750 254,788 302,727 360,177 429,079 511,778 611,102 730,469 - -
5000
10%
30%
90%
10%
5000
10%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
135 149 163 180 198 217 239 263 - -
5,000 5,500 6,050 6,655 7,321 8,053 8,858 9,744 - -
Investment Analysis Tool
Home Introduction IAT Phaco IAT Yag IAT Cash Flow Glossary
Charges for the Procedure each year
Aravind Eye Care System
Cooperative Agreement No.: FAO-A-00-99-00053-00.
Help
Name of the Hospital
IOL surgery
Insurance
Maintenance incl. Service contract
Electricity
Cost per procedure (Cons & others)
Reccuring cost - Variable
Total Initial Investment
Life time of Equipment
Total recurring cost
Additional Charges for the Procedure
% increase in charges each year
No.of Procedures per year
Phaco surgery
Annual Growth Rate
Breakup of Procedure
Paying Patients among cataract surgery
Capital Cost
Recurring cost
Recurring cost - variable
Manpower cost
Annual Inflation Rate (Fixed &
vaiable cost)
Annual Admission for Cataract
surgery
Cost of the Equipment
Ancillary Equipments
Other contingencies - space,
restructuring, furnishing, etc
Provision for working capital - Spares
& Supplies
Rs.
800,000
50,000
50,000
50,000
950,000
7 Years
10%
Cost Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
24,000 24,000 26,400 29,040 31,944 35,138 38,652 42,517 - - -
2,000 2,000 2,200 2,420 2,662 2,928 3,221 3,543 - - -
10,000 10,000 11,000 12,100 13,310 14,641 16,105 17,716 - - -
10,000 10,000 11,000 12,100 13,310 14,641 16,105 17,716 - - -
1,250 375,000 453,750 549,038 664,335 803,846 972,653 1,176,911 - - -
421,000 504,350 604,698 725,561 871,194 1,046,737 1,258,402 - - -
5000
10%
%
4%
100
4000
10%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
300 330 363 399 439 483 531 - - -
4,000 4,400 4,840 5,324 5,856 6,442 7,086 - - -
Recurring cost - fixed
Glossary
Cooperative Agreement No.: FAO-A-00-99-00053-00.
Help
Name of the Hospital
Aravind Eye Care System
Referred patients for yag laser/year
Recurring cost - variable
Manpower cost
Recurring cost
Provision for working capital - Spares
& Supplies
Total Initial Investment
Life time of Equipment
Annual Inflation Rate (Fixed &
Investment Analysis Tool
Home Introduction IAT Phaco IAT Yag IAT Cash Flow
Capital Cost
Cost of the Equipment
Ancillary Equipments
Other contingencies - space,
restructuring, furnishing, etc
Total recurring cost
Annual Cataract surgery with IOL
Maintenance incl. Service contract
Electricity
Cost per procedure (Consumables)
Insurance
Annual Growth Rate
Breakup of Procedure
Hospital Patients requiring yag laser
No.of Procedures per year
Charges for the Procedure each year
Additional Charges for the Procedure
% Increase in Charges each year
Cash Flow Projection
INPUTS units
Investment
Purchase price of equipment Rs. 950,000
Depreciable life of of equipment years 7
Financing
Loan amount as % of purchase price % 100%
Interest rate on loan % 10%
Taxes
Marginal tax rate % 0%
Discount rate % 10%
units Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Initial investment Rs. 950,000
Revenue Rs. 1,200,000 1,452,000 1,756,920 2,125,873 2,572,307 3,112,491 3,766,114 - - -
Recurring Costs - Fixed Rs. 46,000 50,600 55,660 61,226 67,349 74,083 81,492 - - -
Recurring costs - Variable Rs. 375,000 453,750 549,038 664,335 803,846 972,653 1,176,911 - - -
Total Recurring costs Rs. 421,000 504,350 604,698 725,561 871,194 1,046,737 1,258,402 - - -
Operating revenue Rs. 779,000 947,650 1,152,223 1,400,312 1,701,112 2,065,754 2,507,712 - - -
Equipment depreciation Rs. 135,714 135,714 135,714 135,714 135,714 135,714 135,714 - - -
Profit before intrest & taxes Rs. 643,286 811,936 1,016,508 1,264,598 1,565,398 1,930,040 2,371,997 - - -
Interest Rs. 95,000 95,000 95,000 95,000 95,000 95,000 95,000 - - -
Profit before taxes Rs. 548,286 716,936 921,508 1,169,598 1,470,398 1,835,040 2,276,997 - - -
Taxes Rs. - - - - - - - - - -
Net income Rs. 548,286 716,936 921,508 1,169,598 1,470,398 1,835,040 2,276,997 - - -
+ Depreciation Rs. 135,714 135,714 135,714 135,714 135,714 135,714 135,714 - - -
Rs. (950,000) 684,000 852,650 1,057,223 1,305,312 1,606,112 1,970,754 2,412,712 - - -
Discount factor # 1 1.10 1.21 1.33 1.46 1.61 1.77 1.95 2.14 2.36 2.59
Discounted cash flows Rs. (950,000) 621,818 704,669 794,307 891,546 997,269 1,112,439 1,238,103 - - -
INVESTMENT ANALYSIS Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Payback Period
Cummulative cash flow Rs. (950,000) (266,000) 586,650 1,643,873 2,949,184 4,555,296 6,526,051 8,938,762 - - -
Part of year in pay-back period 1.00 0.31 -0.55 -1.26 -1.84 -2.31 -2.70 0.00 0.00 0.00
Part of year in pay-back period 1.00 0.31 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Payback Period Years
INTERNAL RATE OF RETURN (IRR) %
PV of future net cash flows Rs.
NPV of investment Rs. Accept Project
Cooperative Agreement No.: FAO-A-00-99-00053-00.
Help
Name of the Hospital
Aravind Eye Care System
yag Investment Decision for
Net cash inflow from
operations
CASH FLOW
PROJECTIONS
5,410,151
131%
93%
6,360,151
Investment Analysis Tool
Home Introduction IAT Phaco IAT Yag IAT Cash Flow Glossary
Relevant Surgery for = Yes = No Payment Estimate Relevant Non-Relevant
Page 5 of 6
Help
Name of the Hospital
Aravind Eye Care System
Net Present Value (NPV): NPV analysis takes future cash flows and discounts them to their present day value
Positive NPV's are profitable investment ventures while negative NPV's are money losers. Therefore as a rule of thumb if NPV >0 accept investment proposal and if NPV<0 reject
investment proposal
Internal Rate of Return (IRR): It is derivated of NPV. The IRR of an investment is the rate at which the discounted cash flows in the future equal the value of the investment today.
Investment Decisions: The term "Investment" is used to represent the capital outlays made in a variety of situations.
Why Cash Flow: Accounting Profits, as reported in the income statement, are a short-term measurement of an investment in a time frame shorter than the life of the investment, wheras cash flow
analysis is a technique used to evaluate individual projects over the life of the project
Investment Analysis Tool
Home Introduction IAT Phaco IAT Yag IAT Cash Flow Glossary
Depreciation: Depreciation, which appears in income statements, is not relevant in cashflow analysis. Depreciation is an accounting allowance that says that if a piece of equipment has a useful life
of five years then one fifth of the cost in each year of use can be deducted from income.
Pay Back Period: This is the period of time required to recover the initial capital outlay from out of the cashflow generated by the investment. Pay Back Period = Cash Outlay (Investment)/Annual
Cash Inflow
Cash Flow Analysis Vs NPV Technique: Cash flow analysis determines the flows and the NPV technique values them in todays Rupee. In that way different projects can be compared regardless
of timing
Time Value of Money: One rupee today is more valuable than one rupee received a year hence
Cooperative Agreement No.: FAO-A-00-99-00053-00.