Effective health care organizational leadership is required to ensure smooth operations during the process of hospital mergers or acquisitions (Longest & Darr, 2014). Such leadership is based on the knowledge of essential functions and components of health services management, including the function of organizing and universal design factors.
Leadership is recognized as behavior that guides people towards achieving a common objective. The main function of leadership is, therefore, to achieve a common objective, and a major component of leadership is cooperation (Page, 2004, p. 109). Organizing is essential in order to make people collaborate, and it is particularly true in a health care setting, where a number of people in different departments are to work together towards a common goal, providing high-quality patient care (Longest & Darr, 2014). This goal is also to be achieved in a constantly changing regulatory environment, where new laws and regulations which affect the health care industry are introduced every few years. Therefore, the challenges of leading and managing modern health care organizations include, but are not limited to:
- coordinating the work of various workgroups and personnel from different units, for example, clinicians, nurses, administrative personnel, committees, etc.;
- monitoring and optimizing operations management in order to improve the quality and efficacy of healthcare;
- achieving and maintaining a constant level of medical services quality by increasing standardization of patient care;
- facilitating and maintaining trust across the organization;
- actively managing the process of change.
As challenging as the management process is, it is particularly challenging during the process of organizational change, such as merging or acquisition. Proper management of the change process is vital to the initiative’s success. Organizational change is always met with some reaction from the employees, which can either be positive or help facilitate change or negative and hinder the change process. Therefore, for hospital management, it is of utmost importance to properly organize the process of change to ensure smooth operations. Proper organization during the change process requires management to create and maintain a formal structure, which should include the preferences of the personnel (Longest & Darr, 2014). An improper organization is likely to result in a slower merging or acquisition process, negative attitudes of workers towards reorganization, and generally sabotage the process of change. Proper organization during the acquisition process is based on the management’s ability to coordinate the work of different departments and provide staff with timely information about the reorganization process. During the acquisition process, the following three universal design factors are influenced the most:
- level of uncertainty in the work being done.
- degree of standardization of work;
- degree of interaction needed between managers and workers (Longest & Darr, 2014).
During the acquisition process, the level of uncertainty among employees rises due to the fact that work becomes more complex. The degree of standardization suffers during this process during the fact that different organizational policies are being merged, and new supervision policies are being established. The number of workers during the acquisition is likely to increase. This fact means that the interaction between hospital staff and managers is likely to increase due to the management’s involvement in the process of change and the fact that staff is likely to have numerous questions regarding the process of acquisition.
The reorganization process highlights the need of hospital management to efficiently organize the working process and understand the design factors which are influenced the most.
References
Longest, B., & Fache, K. (2014). Managing Health Services Organizations and Systems: Sixth Edition. Towson: Health Professions Press.
Page, A. (2004). Keeping Patients Safe: Transforming the Work Environment of Nurses. Web.
The Process Of Muscle Contraction
For muscles to contract, the muscle fiber creates tension within itself. This tension is brought up by the action of myosin and actin cross-bridging sequence. Contraction in muscles generally means the generation of tension by the muscles with the help of neurons (Starr, Beverly 108). “The sliding-filament theory of muscle action” explains the movement of filaments resulting in relaxation and contraction of muscles. There are two types of filaments in the muscles; the thin filaments and the thick filaments. A group of overlapping thick and thin filaments forms up the sarcomeres. The thin and the thick filaments in the sarcomeres glide over one another which shortens the length of the sarcomere (Starr, Beverly 108). The heads of the myosin interact with the filaments of the actin causing them to slip over each other.
Myosins utilize energy in the form of ATP in bending and pulling the actin causing the muscle to contract. This is a six-step process that starts with the intake of calcium ions by the myosin resulting in the exposure of binding sites on myosin. Once the binding sites are exposed, myosin binds to actin in order for sliding to take place. The myosin is full of energy in the form of ATP at this point. The third step involves myosin grabbing actin and pulling it generally known as power stroke. The next step begins with ATP binding. At this stage, myosin is deficient in energy. More ATP is bound to myosin head. This ATP will be utilized in the next power stroke. This is followed by ATP hydrolysis to release energy in the myosin. This gives myosin a high-energy state. The final stage involves the transfer of calcium ions into the sarcoplasmic reticulum (SR). This happens at the end of signaling from the nervous system that causes muscles to contract. At this point, calcium is taken back to the SR. The muscle relaxes stopping the contraction of the muscle. The above process repeats itself causing contraction and relaxation of the muscles.
ATP is very important in muscle contraction. Muscles require a lot of energy for contraction. ATP is a product of the breakdown of food substances. The amount of ATP stored in the muscles is not enough for contraction processes. This problem is conquered by the conversion of creatine phosphate groups to ADP and finally ATP, which is found in the muscles (Starr, Beverly 112). The ATP formed is used as a source of energy for the contractions. The creatine phosphate in the muscles is sufficient to complement ATP provision before it is provided via respiration and glycolysis in the muscle cells once oxygen is available. “Muscles breakdown glucose releasing energy in the presence of oxygen, this process is called aerobic respiration” (Starr, Beverly 112). In the absence of oxygen supply from the lungs to the muscle tissue, oxygen is supplied from the oxygenated myoglobin. This is a protein that stores oxygen. The muscles, therefore, have their oxygen storage. ATP is thus very important in the determination of the characteristic expansion and contraction of the muscles. ATP determines how long the muscle will hold a contraction, how far the contraction will go, and the force that will accompany the contraction. This explains why muscles suffer from fatigue if the glycogen and oxygen stored in the muscles are used up. Extreme fatigue happens when the anaerobic breakdown of food takes place in the muscles to release ATP. This is normally due to the accumulation of lactic acid generated by anaerobic respiration in the muscle tissues.
Works Cited
Starr, Cecie, and Beverly McMillan. Human Biology. 9th ed. Stamford, Connecticut, U.S.: Cengage Learning. 2012. Print.
Financial Management: Annual Savings For Retirement
Estimating future retirement needs
Planning for future retirement needs should be done carefully. This can be attributed to the fact that retirement is an equally important aspect of the financial well-being of an individual just like investments and purchase of other assets. A challenge that most people face is coming up with clear plans for retirement. In most cases, people take too long to come up with these plans because of the competing needs of the limited finances that people have at their disposal. Some of the other challenges that people face are planning for the family, the effect of inflation, and the pension that will be received after retirement among others. These uncertainties often slow down the process of planning for retirement. Therefore, an individual needs to be aware of the risks they are exposed to and mitigate them. One of the possible ways of mitigating risks is by incorporating possible eventualities in the plans. This section seeks to estimate future retirement needs for Joshua. Specifically, the paper will focus on estimating the annual savings that the client needs to make to achieve the retirement plan.
The calculation of the required annual savings can be broken down into four parts. The first part will focus on estimating the amount of household expenditure that is required during retirement. This is often expressed as a percentage of the level of household expenditure before retirement. In this example, the value is set at 80% of the current household expenditure. The second part of the calculation will estimate the total amount of annual income that an individual expects to earn during retirement. This section also estimates the annual shortfall. The shortfall is the amount by which the amount of annual household expenditure during retirement exceeds the expected annual income after retirement. The amount of annual savings will be calculated based on the estimated value of the shortfall. The third part of the solution will focus on adjusting the value of the estimated shortfall for the effects of inflation. The anticipated annual rate of inflation before retirement will be used. Thus, the annual shortfall will be multiplied by the inflation factor to arrive at the value of the annual shortfall adjusted for inflation. Failure to adjust the value for inflation will give misleading results. The final step yields the required annual savings. First, the total amount of funds that is required for retirement will be calculated. The inflation-adjusted value of the annual shortfall will be divided by the required rate of return after retirement to arrive at this value. Secondly, the compound interest factor will be obtained from the tables. In this case, the expected annual rate of return on investment before retirement will be used. The value of annual savings that is required will be arrived at through the division of the total amount of retirement fund required by the compound interest factor. The calculations are summarized in the table below.
Part 1 | |
Estimated household expenditure in retirement | |
Estimated number of years to retirement | 30 |
Estimated level of household expenditure (less savings) | 84,000 |
Estimate the proportion of household expenditure in retirement as a percentage of current level of household expenditure | 80% |
Estimated household expenditure in retirement (80% * 84,000) | 67,200 |
Part 2 | |
Estimated income in retirement | |
Approximate value of end of year income in retirement from CPF | $53,000 |
Total annual income | $53,000 |
Annual shortfall (annual expenditure – total income) | $14,200 |
Part 3 – Inflation | |
Anticipated annual inflation before retirement | 5% |
The inflation factor (it is based on 30 years and the anticipated rate of annual inflation 5%) | 4.32 |
Annual shortfall adjusted for inflation ($14,200 * 4.32) | 61,344 |
Part 4 – Estimating the annual savings that are required to fund the shortfall | |
Annual rate of return on investments during retirement | 10% |
The total amount of retirement fund required ($61,344 / 10%) | $613,440 |
Annual rate of return on investments before retirement | 8% |
Compound interest factor (based on 30 years and the expected rate of return on investment is 8%) | 113.283 |
The amount of annual savings that is needed to fund retirement ($613,440 / 113.283) | $5,415.11 |
From part 1, the estimated value of household expenditure during retirement is $67,200. The total annual income expected during retirement is estimated to be $53,000. The resulting annual shortfall amounts to $14,200. From part 3, the annual shortfall adjusted for inflation amounts to $61,344. From part 4, the resulting value of the annual end of year savings that is required for investment during the period until retirement amounts to $5,415.11.
Price of preferred stock of Big Oil and number of shares
Preference shares are simpler to value than common stock. This can be attributed to the fact that they pay a constant amount of dividend. Besides, this category of shares does not have a maturity date. They are held on the books until a company liquidates. These features make them appear as a blend of debt and common stock. Investment in preferred stock offers a promise to pay dividend annually until perpetuity. However, payment of dividend on preferred stock highly depends on the profit earned by a company. Therefore, if a company makes profit in a specific financial year, then the dividends will be paid. However, during periods when a company does not make profits, it becomes impossible to pay dividends on preferred stock. In such cases, most companies often suspend the payment of dividend. When such companies return to a state of profitability, dividends on preferred stock are paid before dividends on common shares. Besides, the dividends in arrears are also paid full. Such companies always strive to make up for the dividends on preferred stock that were not paid. However, it is worth mentioning that when a company skips payment of dividend, the value of preferred stock declines. Therefore, this makes it important for a company to maintain the value of the preferred stock so that the shareholders do not make losses when the value of the preferred shares drops. This can be achieved by ensuring that one of the major goals of a company is profit maximization. If the required rate of return is not provided, then the capital asset pricing model will be used to estimate the discount rate. Calculation of the price of preferred stock is presented below.
- Annual dividend payments on preferred stock of Big Oil = $4
- Required rate of return = 8%
- Year 1dividend = 0
- Year 2 dividend = 0
- Year 3 dividend = $12
- Year 4 dividend = $4 onwards.
The solution for this problem will be approached in two steps. The first part of the solution will focus on the $12 dividend that is expected in three years. The second part of the solution will focus on the $4 that will be paid after the third year. Therefore, the present value of each part will be calculated separately and the two will be combined to obtain the price value of the shares.
First part
Present value
= $12 / (1 + 0.08)^{3}
= $9.53
Second part
The second part will focus on estimating the present value of perpetuity from the third year.
- Present value (year 3)
- = $4 / 0.08
- =$50
- Present value of perpetuity
- = $50 / (1 + 0.08)3
- = $39.69
- Price of preferred shares = value of $12 dividend + value of $4 perpetuity
- = $9.53 + $39.69
- = $49.22
If the company had paid dividends consistently without skipping, then the value of the preferred stock will be $50. Even though the company eventually made the dividend payment for the periods that were skipped, the value of the preferred stock dropped slightly to $49.22. In this case, shareholders will lose $0.88 per share. The price of preferred stock for Big Oil Company is $49.22.
Calculation of number of shares
The number of shares will be arrived at through the division of the total amount that is available for investment by the estimated price per share.
= $9,500 / $49.22
= 193 shares
Thus, with a total of $9,500 Joshua can purchase 193 shares of preferred stock for Big Oil.
Price of Bonds of Bank Corp.
A bond, as a debt instrument, pays the principal amount at maturity. In addition, there are periodic interest payments. Further, the cash flow on bonds is fairly certain. The price of a bond is estimated by adding the present value of the future stream of expected cash flow. In other words, if an investor receives periodic interest payments, then the present value of that investment can be estimated using these payments. The total amount that will be received by the investor is the sum of the present value of periodic interest payments and the maturity value of the bond. The details of the bond are presented in the table below.
From the information provided, the period to maturity of the bond is 10 years. That is between 1^{st} January 2016 and 31^{st} December 2025. The periodic interest payment will be calculated at 7% of the par value. The first step is to estimate the periodic interest rate. The coupon rate is 7% and interest is paid semi-annually. The calculation of the amount of interest is presented below.
- = ½ * 7% * $100
- = $3.5
Since the interest is paid semi-annually, the required rate of return will be halved to 4% (8% *1/2) and the time to maturity will be doubled to 20 periods (10 years * 2).
- = $3.5 * [1 – (1 + 0.04)^{-20}] / 0.04 + $100 (1 + 0.04)^{20}
- = $3.5 * [1 – (1.04)^{-20}] / 0.04 + $100 (1 + 0.04)^{20}
- = $3.5 * [0.543613053] / 0.04 + $100/ (1 + 0.04)^{20}
- = $3.5 * 13.5903 + 45.6387
- = $47.5661 + 45.6387
- = $93.20
Thus, a bond that is settling on 1^{st} January 2016 that has a par value of $100 and a maturity date of 31^{st} December 2025 with a coupon rate of 7% and a required rate of return of 8% will be priced at $93.20. This is based on the assumption that the redemption value of the bond is equal to the par value of $100. The result above has a number of implications to a bondholder. All the possible factors that can affect the price of a bond are included in the calculations. The result above can be interpreted in a number of ways. The difference between the settlement and maturity date will be determined by the duration that the investor will hold the bond. If this duration is longer, then the price of bond will be lower. Also, the required rate of return can be compared to the coupon rate. If the difference between these rates is large, then the price of the bond will be low. Finally, the difference between the redemption value and par value affects the price of the bond. If the difference in these two prices is large, then the price of the bond is likely to be lower. Therefore, before investing in bonds, an investor needs to look at these factors and make decisions that will maximize returns.
Number of bonds
Calculation of the number of bonds will be arrived at through the division of the total amount that is available for investment and the price of the bond that is estimated above. The calculations are presented below.
- Number of bonds = cash available for the investment / price of the bond
- = $9,500 / $93.20
- = 101.93 bonds
When rounded off to the nearest whole number, then the investor should buy 102 bonds.
Calculating the price of the stock and number of shares
The estimation of the price of the stock is multifaceted. This can be attributed to the fact that the future stream of cash flow from investments made in shares cannot be predicted with certainty. The stream of cash flow that is expected from common stock highly depends on the financial performance of an entity. The first step in the calculation of the price of the stock is the estimating the required rate of return. In this case, the capital asset pricing model (CAPM) will be used. Thus, since the amount of dividend and the future share price is not known with certainty, then it is an indication that there are risks associated with investing in common stock. Therefore, it is important to estimate the value required rate of return that incorporates the risk that are associated with investing in common stock. The CAPM model is stated below.
- Required rate of return = risk free rate of return + beta * (expected return on the market – risk free rate of return)
- Risk premium = expected return on market – risk free rate of return
- Risk free rate of return = 3%
- Beta = 1.2
- Risk premium = 6%
- Required rate of return (discount rate)
- = 3% + 1.2 * 6%
- = 9.6%
This discount rate of 9.6% will be used to estimate the price of common stock. It can be noted that the dividend payment is expected to grow at different rates. Therefore, a two stage dividend discount model will be used to estimate the price of the shares. The dividend is expected to grow at the rate of 8% per annum over a period of 3 years and at 4% per year onwards. The most recent divided that is paid by the company amounts to $2 per share. The price of the shares will be calculated in two steps. The first step is to calculate the present value of the future stream of dividend payment during the period of high growth rate (8%). The second step is to calculate the future stream of payment that will be received after the period of high growth rate. The calculations are presented in the table below.
Calculations of dividends
Current dividend | $2 | |
Dividend after 1 year | $2 * (1 + 0.08) | $2.16 |
Dividend after 2 years | $2.16 * (1 + 0.08) | $2.3328 |
Dividend after 3 years | $2.3328 * (1 + 0.08) | $2.519424 |
The growth rate for the first 3 years is 8%. The resulting value of dividend at the end of the third year is $2.519424. However, in the second stage, the growth rate of dividend is 4%. Thus, dividend after the fourth year will be calculated as shown below.
= $2.519424 * 1.04
= $2.62020096
It will be assumed that dividend will remain constant for eternity. The present value of the perpetual dividend will be calculated using the formula presented below.
Value of stock = dividend per share that is paid at year end / (discount rate – growth rate)
This formula that will be used to calculate the present value at the end of the third year is shown below.
= $2.62020096 / (0.096 – 0.04)
= $2.62020096 / 0.056
= $46.7893
The final step is the calculation of the present values of the stream of benefits that the customer will earn from the investment is summarized in the table below.
Year | Cash flow | Discount rate | Present value interest factor | Present value |
1 | $2.16 | 9.6% | 0.91240876 | $1.97 |
2 | $2.3328 | 9.6% | 0.83248974 | $1.94 |
3 | $2.519424 | 9.6% | 0.75957093 | $1.91 |
3 | $46.78930286 | 9.6% | 0.75957093 | $35.54 |
Total | $41.37 |
The sum of all the present values ($41.37) is the price of the common stock. This price can aid Joshua in making a number of decisions. For instance, the investor can compare this value to the prevailing market price of the shares. If the prevailing market price is lower than the price calculated above, it can be an indication that the shares are undervalued. This can be interpreted that the growth rate that is used in the model is higher than what the market expects. In this case, it may be important to reduce the growth rates that are used in the model with an aim of ensuring that the outcome of the model is consistent with the perception of the market. From another point of view, an investor can assume that the prevailing market prices are lower than intrinsic value. Thus, the shares are trading at a cheaper price. The investor can gain by purchasing these shares because the prices are bound to rise. On the other hand, if the intrinsic value is lower than the market price, then it indicates that the shares are overvalued. In this case, the prices of the shares are likely to fall in the future and an investor is likely to make losses. Therefore, it can be an indication of a bad investment. Another interpretation of this scenario is that the market expects the share prices to grow at a rate that is higher than what is used in the model. In this case, it may be necessary to adjust the growth rates that are used in the model upwards.
Calculating the number of shares
The number of shares will be calculated through the division of the total amount available for investment by the price per share. The calculations are presented below.
Number of shares = Total amount of money available for the investment / price per share
= $9,500 / $41.37
= 229.6 shares.
When the estimated value is truncated, then Joshua should buy 229 shares of Thunderbird.
Expected return and standard deviation of the portfolio
Company | Expected return | Standard deviation | Weight |
A | 10% | 14% | 30% |
B | 12% | 18% | 50% |
C | 9% | 12% | 20% |
Correlation coefficient
A | B | C | |
A | 1.00 | 0.80 | 0.60 |
B | 0.80 | 1.00 | -0.4 |
C | 0.60 | -0.40 | 1.00 |
Expected return of the portfolio
= Weight of stock A * expected return of stock A + Weight of stock B * expected return of stock B + Weight of stock C * expected return of stock C
= (30% * 10%) + (50% * 12%) + (20% * 9%)
= 3% + 6% + 1.8%
= 10.8%
Standard deviation of the portfolio
The first step is to calculate the variance of the portfolio. The standard deviation of the portfolio will be the square root of variance. The formula for calculating variance is presented below.
= (Weight of stock A)^{2} * (variance of stock A) + (weight of stock B)^{2} * (variance of stock B) + (weight of stock C)^{2} * (variance of stock C) + (2 * weight of stock A * weight of stock B * covariance_{AB}) + (2 * weight of stock A * weight of stock C * covariance_{AC}) + (2 * weight of stock B * weight of stock C * covariance_{BC})
Calculation of covariance
It can be noted that the formula entails the use of covariance. However, only the values of the correlation coefficient between the assets are provided. There is a mathematical relationship between covariance and correlation. The values of covariance will be estimated using this relationship as presented below.
The correlation between two stocks = Covariance between the two stocks
Standard deviation of stock 1 * standard deviation of stock 2
Covariance = Correlation between two stock * products of standard deviation of the two stocks
Covariance_{AB} = correlation_{AB} * standard deviation A * standard deviation B
= 0.8 * 0.14 * 0.18
= 0.02016
Covariance_{AC} = correlation_{AC} * standard deviation A * standard deviation C
= 0.6 * 0.14 * 0.12
= 0.01008
Covariance_{BC} = correlation_{BC} * standard deviation B * standard deviation C
= -0.4 * 0.18 * 0.12
= -0.00864
Calculation of portfolio variance
= (0.3^{2} * 0.14 * 0.14) + (0.5^{2} * 0.18 * 0.18) + (0.2^{2} * 0.12 * 0.12) + (2 * 0.3 * 0.5 * 0.02016) + (2 * 0.3 * 0.2 * 0.01008) + (2 * 0.5 * 0.2 * -0.00864)
= 0.001764 + 0.0081 + 0.000576 + 0.006048 + 0.0012096 – 0.001728
= 0.0159696
Portfolio standard deviation
= √0.0159696
= 0.1264
=12.64%
Therefore, if Joshua wants to invest in the three stocks, then the portfolio will yield an expected return of 10.8%. The standard deviation (a measure of risk) of the portfolio will be 12.64%.