THE COMPANY
HSI was a for –profit health care company located in Richmond, Virginia, which had recently diversified into related fields. In 1990, HSI was very large and growing in terms of sales, with revenues of more than $2 billion for the year. As a result of the escalation and variability of health care costs, HSI kept enough cash reserves to cover approximately two mouths of operating expenses. The finance department had given Robertson and after-tax hurdle rate of 11 percent to discount his cash flows for the aircraft investment project.