Coverage 4 Marketing, Sales, & Channel Management The biggest goal for a distribution channel is to create a product that is easily available to the customer who wish to buy the merchandise. In the consideration of consumer goods, two conditions of availability should be thought-through. First, attain the wanted standard of coverage in the conditions of the appropriate retail outlets. For this reason, retailers vary in their sales volume and manufacturers have to consider the importance of all retailers on the grounds of their chunk of transactions inside the stock category. For example, a bundle of edible material may be stocked by only 40 percent of the districts food stores. However, there may be 70 percent of all commodity volume (ACV) because it is controlled mainly through the supermarkets accounting for a great amount of the mass sales of the products. Second element to consider about availability for consumer goods is the products location inside the store. One approach to gauge performance in this area is the percentage of accessible shelf or display room committed to a brand, carried by the significance of the store. Let’s use industrial products, for determining channel performance through the wholesale stage for consumer products. Appropriate concerns of availability are whether the industrial customer or retailer has the time to make a purchase and acquire the merchandise while it is desired. Now we have a question of the adequacy of market coverage. Companies can evaluate coverage by weighting out how frequently customers in an area are selected by business or distributor sales representative and by the period required to fulfill and transport an order (i.e., order cycle time). Cycle time procedures are especially important when retailers can buy their demands directly from a corporations Web site, or through a linked manufacturer via a computerized system. Product availability is a vital goal for every distribution channels. The convenient level of availability fluctuates with the features of the merchandise and the desired customers, particularly the merchandises significance to the customers and the output of time and work they will exhaust to attain it. For example, customer convenience goods, like packaged goods and health products, require urgent availability because nearly all customers are reluctant to dedicate a great deal of effort to obtain a certain brand. While urgent availability is barely critical for exclusive and essential merchandise, like customer specialty goods or important industrial supplies and installations. Market and competitive elements also determines a company’s ability to bring a desired degree of availability for its merchandise. When demand is short or while the brand possesses a tiny relative share of the entire market, wholesalers or retailer’s eager to display it may be tough to find. The company may have to provide added incentives and inducements to manage a fair degree of.

1. Coverage 4
Marketing, Sales, & Channel Management
The biggest goal for a distribution channel is to create a
product that is easily available to the customer who wish to buy
the merchandise. In the consideration of consumer goods, two
conditions of availability should be thought-through. First,
attain the wanted standard of coverage in the conditions of the
appropriate retail outlets. For this reason, retailers vary in their
sales volume and manufacturers have to consider the importance
of all retailers on the grounds of their chunk of transactions
inside the stock category. For example, a bundle of edible
material may be stocked by only 40 percent of the districts food
stores. However, there may be 70 percent of all commodity
volume (ACV) because it is controlled mainly through the
supermarkets accounting for a great amount of the mass sales of
the products. Second element to consider about availability for
consumer goods is the products location inside the store. One

2. approach to gauge performance in this area is the percentage of
accessible shelf or display room committed to a brand, carried
by the significance of the store.
Let’s use industrial products, for determining channel
performance through the wholesale stage for consumer products.
Appropriate concerns of availability are whether the industrial
customer or retailer has the time to make a purchase and acquire
the merchandise while it is desired. Now we have a question of
the adequacy of market coverage. Companies can evaluate
coverage by weighting out how frequently customers in an area
are selected by business or distributor sales representative and
by the period required to fulfill and transport an order (i.e.,
order cycle time). Cycle time procedures are especially
important when retailers can buy their demands directly from a
corporations Web site, or through a linked manufacturer via a
computerized system.
Product availability is a vital goal for every distribution
channels. The convenient level of availability fluctuates with
the features of the merchandise and the desired customers,
particularly the merchandises significance to the customers and
the output of time and work they will exhaust to attain it. For
example, customer convenience goods, like packaged goods and
health products, require urgent availability because nearly all
customers are reluctant to dedicate a great deal of effort to
obtain a certain brand. While urgent availability is barely
critical for exclusive and essential merchandise, like customer
specialty goods or important industrial supplies and
installations.
Market and competitive elements also determines a company’s
ability to bring a desired degree of availability for its
merchandise. When demand is short or while the brand
possesses a tiny relative share of the entire market, wholesalers
or retailer’s eager to display it may be tough to find. The
company may have to provide added incentives and inducements
to manage a fair degree of product availability. On the
alternative side, a brand’s clear competitive position makes it

3. easier to achieve broad retail coverage and shelf space.
Retailers move merchandise and services straight to final
customers for their private, nonbusiness use. Considering
retailers mostly hold title to the merchandise they carry, their
earnings is the margin between what they spend for the goods
and the fee they charge their customers. Retail business can be
classified in many various forms, such as by the kind of goods
carried (supermarkets, drugstores, boutique), with a span of
product variety (department stores or specialty), cost procedure
(specialty stores or discount), or style of the company’s grounds
(e-tailors, mail-order retailers, vending-machine operators,
traditional stores). Another beneficial classification plan that
puts together store, is based on their procedure of operation—
low margin/high turnover contrast to high margin/low turnover.
To hold quantity high while minimizing inventory investments,
low-margin/high-turnover business generally thinks about
closely on fast- moving items—like edible material, health and
beauty care products, key clothing articles, and housewares,
also they carry a very limited choosing in each product type.
Illustration of specific retailers include mass-goods discounters,
wholesale company’s, nearly all supermarket and drug chains,
and some distinctive chains in such operations like women’s
clothing, footwear, tools, office supplies, and building
equipment (e.g., Home Depot and Lowe’s).
To benefit from, low-margin/high-turnover retailers need to
minimize their price tag. The company’s focal point on
standardized, prepackaged goods assist in reducing personnel
costs by lowering or eliminating in-store sales compensation. It
also sets up the company to centralize several purchasing and
store operating resolutions, thusly decreasing the total of
administrative personnel required. A lot of such operations—
especially the mass wholesalers—also reduces their cash
investments by running out of freestanding, basic facilities
close to major traffic arteries; areas where property costs, rents,
and taxes are reasonable. Several specialty store conglomerate,
however, function out of sizable malls.

4. Reference:
Anand, A. Agarwal, M. Bansal, G. Garmabaki, A. (2016).
Journal of Marketing Analytics. Studying Product diffusion
based on Market Coverage, Vol. 4 Issue 4, p135-146.
12p. Retrieved from: Argosy Library
http://smallbusiness.chron.com/companies-high-asset-turnover-
low-profit-margin-76515.html
HCM565
Module 4 CT
Chapter 11 Problem 1
Winston Clinic is evaluating a project that costs $52,125 and
has expected net cash flows of $12,000 per year for eight years.
The first inflow occurs one year after the cost outflow, and the
project has a cost of capital of 12 percent.
a. What is the project's payback?
b. What is the project's NPV? Its IRR?
c. Is the project financially acceptable? Explain your answer.
Chapter 11 Problem 3
Capitol Health Plans, Inc., is evaluating two different methods
for providing home health services to its members. Both

5. methods involve contracting out for services, and the health
outcomes and revenues are not affected by the method chosen.
Therefore, the incremental cash flows for the decision are all
outflows.
Here are the projected flows:
Year
Method A
Method B
0
-$300,000
-$120,000
1
-$66,000
-$96,000
2
-$66,000
-$96,000
3
-$66,000
-$96,000
4
-$66,000
-$96,000
5
-$66,000
-$96,000
a. What is each alternative's IRR?
b. If the cost of capital for both methods is 9 percent, which
method should be chosen? Why?
Chapter 11 Problem 5
Assume that you are the CFO at Porter Memorial Hospital. The

6. CEO has asked you to analyze two proposed capital
investments: Project X and Project Y. Each project requires a
net investment outlay of $10,000, and the cost of capital for
each project is 12 percent. The project's expected net cash flows
are as follows:
Year
Project X
Project Y
0
-$10,000
-$10,000
1
$6,500
$3,000
2
$3,000
$3,000
3
$3,000
$3,000
4
$1,000
$3,000
a. Calculate each project's payback period, net present value
(NPV), and internal rate of return (IRR).
b. Which project (or projects) is financially acceptable? Explain
your answer.
Chapter 11 Problem 7
California Health Center, a for-profit hospital, is evaluating the
purchase of new diagnostic equipment. The equipment, which
costs $600,000, has an expected life of five years and an
estimated pretax salvage value of $200,000 at that time. The

7. equipment is expected to be used 15 times a day for 250 days a
year for each year of the project's life. On average, each
procedure is expected to generate $80 in collections, which is
net of bad debt losses and contractual allowances, in its first
year of use. Thus, net revenues for Year 1 are estimated at 15 X
250 X $80 = $300,000.
Labor and maintenance costs are expected to be $100,000
during the first year of operation, while utilities will cost
another $10,000 and cash overhead will increase by $5,000 in
Year 1. The cost for expendable supplies is expected to average
$5 per procedure during the first year. All costs and revenues,
except depreciation, are expected to increase at a 5 percent
inflation rate after the first year.
The equipment falls into the MACRS five-year class for tax
depreciation and hence is subject to the following depreciation
allowances:
Year
Allowance
1
0.2
2
0.32
3
0.19
4
0.12
5
0.11
6
0.06
The hospital's tax rate is 40 percent, and its corporate cost of
capital is 10 percent.

8. a. Estimate the project's net cash flows over its five-year
estimated life.
b. What are the project's NPV and IRR? (Assume that the
project has average risk.)
(Hint: Use the following format as a guide.)
Year
0
1
2
3
4
5
Equipment cost
Net revenues

9. Less:
Labor/maintenance costs
Utilities costs
Supplies
Incremental overhead

10. Depreciation
Operating income
Taxes
Net operating income
Plus: Depreciation

11. Plus: After-tax equipment salvage value*
Net cash flow
*

12. Pretax equipment salvage value
MACRS equipment salvage value
Difference
Taxes
After-tax equipment salvage value

13. Chapter 12 Problem 3
Consider the project contained in Problem 7 in Chapter 11
(California Health Center).
a. Perform a sensitivity analysis to see how NPV is affected by
changes in the number of procedures per day, average collection
amount, and salvage value. Remember supplies vary with
number of procedures.
b. Conduct a scenario analysis. Suppose that the hospital's staff
concluded that the three most uncertain variables were number
of procedures per day, average collection amount, and the
equipment's salvage value. Furthermore, the following data
were developed:
Equipment
Number of
Average
Salvage
Scenario
Probability
Procedures
Collection
Value
Worst
0.25
10
$60
$100,000

14. Most likely
0.50
15
$80
$200,000
Best
0.25
20
$100
$300,000
c. Finally, assume that California Health Center's average
project has a coefficient of variation of NPV in the range of 1.0
- 2.0. (Hint: Coefficient of variation is defined as the standard
deviation of NPV divided by the expected NPV.) The hospital
adjusts for risk by adding or subtracting 3 percentage points to
its 10 percent corporate cost of capital. After adjusting for
differential risk, is the project still profitable?
d. What type of risk was measured and accounted for in Parts b.
and c.? Should this be of concern to the hospital's managers?
Chapter 12 Problem 5
Allied Managed Care Company is evaluating two different
computer systems for handling provider claims. There are no
incremental revenues attached to the projects, so the decision
will be made on the basis of the present value of costs. Allied's
corporate cost of capital is 10 percent. Here are the net cash
flow estimates in thousands of dollars:
Year
System X
System Y
0
-$500
-$1,000

15. 1
-$500
-$300
2
-$500
-$300
3
-$500
-$300
a. Assume initially that the systems both have average risk.
Which one should be chosen?
b. Assume that System X is judged to have high risk. Allied
accounts for differential risk by adjusting its corporate cost of
capital up or down by 2 percentage points. Which system should
be chosen?
Chapter 12 Problem 10
Michigan Home Health is considering opening an office in a
new market. The organization has identified the number of
home visits, revenue per home visit, and the level of fixed costs
of the new office as being the major sources of uncertainty in
the investment decision. To get a better understanding of the
sensitivity of the new office NPV to these variables, the
following data have been assembled:
Change
NPV
from
Number
Revenue
Level of
base
of home

16. per home
fixed
case
visits
visit
costs
-30%
-$814
-$57
$82
-20%
-$515
-$11
$82
-10%
-$216
$36
$82
0%
$82
$82
$82
10%
$381
$129
$82
20%
$680
$176
$82
30%
$979
$222
$82
Construct a graph to show the sensitivity of the new office NPV

17. to each variable.
Critical Thinking Assignment (75 points)
Problems in Chapters 6 & 9
Complete the following problems in Chapters 6 and 9 from your
textbook, Understanding Healthcare Financial Management. Be
sure you are completing the “Problems” and not the “Mini-
cases.”
· Chapter 6: Problems 1, 3, 5, & 6
· Chapter 9: Problems 2, 3, & 5
Access the problems
at https://www.ache.org/pubs/hap_companion/book.cfm?pc=228
3 or from the attached transcript.
Show your calculations used to derive your answers. If the
problems require narrative answers as well as calculations, you
must format those answers using APA style, as per the CSU-
Global Guide to Writing and APA.
Reach out to your instructor earlier rather than later if you are
having difficulties.