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Mobile dental operations: capital budgeting and long‐term viability
Author(s) -
Arevalo Oscar,
Chattopadhyay Amit,
Lester Harold,
Skelton Judy
Publication year - 2010
Publication title -
journal of public health dentistry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.64
H-Index - 63
eISSN - 1752-7325
pISSN - 0022-4006
DOI - 10.1111/j.1752-7325.2009.00140.x
Subject(s) - depreciation (economics) , finance , cash flow , net present value , business , operating expense , capital expenditure , economics , capital formation , financial capital , human capital , production (economics) , economic growth , macroeconomics
Objective: The University of Kentucky College of Dentistry (UKCD) runs a large mobile dental operation. Economic conditions dictate that as the mobile units age it will be harder to find donors willing or able to provide the financial resources for asset replacement. In order to maintain current levels of access for the underserved, consideration of replacement is paramount. A financial analysis for a new mobile unit was conducted to determine self‐sustainability, return on investment (ROI), and feasibility of generating a cash reserve for its replacement in 12 years. Methods: Information on clinical income, operational and replacement costs, and capital costs was collected. A capital budgeting analysis (CBA) was conducted using the Net Present Value (NPV) methodology in four different scenarios. Depreciation funding was calculated by transferring funds from cash inflows and reinvested to offset depreciation at fixed compound interest. Results: A positive ROI was obtained for two scenarios. He depreciation fund did not generate a cash reserve sufficient to replace the mobile unit. Conclusions: Mobile dental programs can play a vital role in providing access to care to underserved populations and ensuring their mission requires long‐term planning. Careful financial viability and CBA based on sound assumptions are excellent decision‐making tools.