Compute the worth of Arcadia Hospital in 2005 using rules of thumb, adjusted book value, and discounted cash flow valuation (for this final method, use the table provided). Assume the cash flow for 2005 is the same as 2006.
1)Rules of thumb:
2)Adjusted book value:
3)Discounted cash flow:
Cash Flow amount
Capitalization Rate
Value
6%
8%
10%
12%
Part II: Compare your findings for each valuation method, and discuss any differences or similarities between the calculated values. What method do you think gives the most accurate picture of the worth of Arcadia in 2005? Explain your answer.
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