HCS 415 Brockport Managerial Accounting Financial Management in HealthCare Quiz

Question Description

PLEASE ANSWER 5 OUT OF 6 QUESTIONS. TEST IS ATTACHED

1. 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% =

2. If you were to invest $9,000 today, how much will she have in 25 yrs @ 14%?

a) Compute annually

b) Compute semi-annually

3. 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% =

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 X Y

0 -$10,000 -$10,000

1 $6,500 $3,500

2 $3,000 $3,500

3 $3,000 $3,500

4 $1,000 $3,500

a.Calculate each projects payback period, net present value (NPV), and internal rate of return (IRR).

b.Which project or projects should be accepted and why?

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 projects 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.

6. St. Olivias 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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