HCS 415 Brockport Managerial Accounting Financial Management in HealthCare Quiz

HCS 415 Brockport Managerial Accounting Financial Management in HealthCare Quiz
Test 4 -HCS415 Financial Management in HealthCare
Dr. Sam Lanzafame
Brockport State College
Name_____________________________
Directions: Choose any 5 questions, they are worth 20 points each.
1.
2.
What is the present value of $10,000 in:
a) 25 yrs. @ 6%? =
b) 2 yrs. @ 9%? =
c) 4 yrs. @ 10% =
d) 8 yrs. @ 8% =
e) 10 yrs. @ 4% =
f) 20 yrs @ 12% =
If you were to invest $9,000 today, how much will she have in 25 yrs @ 14%?
a)
Compute annually
b)
3.
Compute semi-annually
If you were to invest $10,000 per period for the following number of periods, how much
would she have? (20 points)
a)
6 yrs. @ 8%
=
b)
40 yrs. @ 12% =
c)
12 yrs. @ 10% =
d)
50 yrs. @ 9%
=
Test 4 -HCS415 Financial Management in HealthCare
Dr. Sam Lanzafame
Brockport State College
Name_____________________________
Directions: Choose any 5 questions, they are worth 20 points each.
4.
The director of capital budgeting, has asked you to analyze two proposed capital
investments, Project X and Project Y. Each project has a cost of $10,000, and a cost of
capital for each is 12%. The projects’ expected net cash flows are as follows:
Year
0
1
2
3
4
X
-$10,000
$6,500
$3,000
$3,000
$1,000
Y
-$10,000
$3,500
$3,500
$3,500
$3,500
a. Calculate each project’s payback period, net present value (NPV), and internal rate
of return (IRR).
b. Which project or projects should be accepted and why?
Test 4 -HCS415 Financial Management in HealthCare
Dr. Sam Lanzafame
Brockport State College
Name_____________________________
Directions: Choose any 5 questions, they are worth 20 points each.
5.
Assume you are the chief financial officer at MMM Hospital. The CEO has asked you to
analyze two proposed capital investments:
The S Project vs. the T Project
Each project requires a net investment outlay of $75,000, and the cost of capital for
each project is 10%. The projects’ expected net cash flows are as follows:
Year
Project S
Project T
0
-$75,000
-$75,000
1
$20,000
$50,000
2
$20,000
$15,000
3
$20,000
$15,000
4
$30,000
$10,000
a. Calculate each project’s net present value (NPV) and internal rate of return (IRR).
b. Which project (or projects) is financially acceptable? If you reach different
conclusions regarding the financial acceptability of each project, explain why, given
both projects return total cash flows of $90,000 over the four years.
Test 4 -HCS415 Financial Management in HealthCare
Dr. Sam Lanzafame
Brockport State College
Name_____________________________
Directions: Choose any 5 questions, they are worth 20 points each.
6.
St. Olivia’s is evaluating two different methods for providing home health services to its
members. Both 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. The projected flows follow:
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) Calculate IRR for each method.
b) If the cost of capital for both methods is 9%, which method should be chosen and
why?

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