Chang Dental Clinic free essay sample

Chang Dental Clinic Case Analysis Chris Miller has been given an opportunity to take over an established dental clinic. The benefits of taking over this clinic is that he already has loyal customers and that there is only three clinics in the city. Miller has some major decisions that he needs to think about before he takes over this practice. He needs to decide how he will finance this purchase and how will he get the bank to give him a loan? Before we can even decide if he should go ahead with the purchase, we need to analyze three different scenarios of what can happen to the practice.We also need to make sure that Miller would be able to repay the loans as we are analyzing the different scenarios. Scenario 1 Scenario 1 is according to Miller’s assumption. He believes that he would reduce the associate fee to 15% and that the sales growth would equal to half the increase in sales from fiscal year 2004 and 2005. We will write a custom essay sample on Chang Dental Clinic or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page With this in mind, I set g to equal 17. 5% which is considered â€Å"high† because inflation is 3%, so g has to be greater than 0. 08 + inflation. After that I decided to make the inflation 0. 16 because of the rule of thumb that we discussed in the infamous notes.According to the case, Miller would make the visit to the dentist more pleasurable and stress-less. The only way this scenario can happen is if new competition come in or he does a bad job in fixing teeth. Just to show the â€Å"worst case scenario,† I set growth rate at 0% and the rest of the years decline 5%. We would hope that after declining of sales, Miller would liquidate the firm in 2009. As we can see, change in working capital is increasing as sales are decreasing, which means he can’t pay off the debits. If we look at the cash flow forecast, if Miller decides to liquidate the firm in 2009, then the book value of the fixed assets would be 14,836 and the salvage value would be 10,385. This scenario is unlikely to occur because there is no way that Miller can fail that badly that sales just drop dramatically. Recommendation After analyzing all the scenarios, I believe that scenario 2 is the most likely scenario to happen. Miller should purchase the practice but make sure to keep expenses low.Miller needs to figure out what expenses they don’t need to pay so much money for but should not compromise with quality of care. Miller needs to understand as the practice grows and more patients come in, he would need associates to help him with the overload of patients. He should focus on keeping the customers happy and stress-free when they are at his clinic. There is going to be risk involved in buying this practice, but in long run it will make him a lot of money. The cash flow looks very strong and promising for a successful business.