Harris Health is considering the development of a new ambulatory care service. The project will cost $500,000 to implement and have a useful life of five years. At the conclusion of the project’s useful life, equipment associated with the project can be sold for $45,000. Over the five years of operation, incremental revenue attributed to the project will be $180,000 annually, while incremental expenses annually will be $48,000. The organization is also considering an alternative project of similar risk and time horizon which has a rate of return equal to 4.5%. Assume Harris Health has a hurdle rate of 7% for projects of this type. From a financial perspective, should Harris pursue the project?
The computed internal rate of return is greater than the hurdle rate, therefore Harris Health should pursue the project.
The computed internal rate of return is less than the hurdle rate, therefore Harris Health should pursue the project.
The computed internal rate of return is greater than the hurdle rate, therefore Harris Health should not pursue the project.
The computed internal rate of return is equal to the hurdle rate, therefore Harris Health should pursue the project.
Question 14
What is meant by an organization’s hurdle rate?
Hurdle rate is the maximum acceptable rate of return on a project.
Hurdle rate is the minimum acceptable rate of return on a project.
Hurdle rate is the minimum acceptable expenditure on a project.
Hurdle rate is the maximum acceptable expenditure on a project.
Question 15
A specific investment provides an opportunity for the following stream of cash flows: Year CY+ 1 through CY + 5: $40,000 per year, years CY+6 through CY+10: $25,000 per year, year CY+11: $5,000. Assume a discount rate of 4%. What should you be willing to pay for this investment? Solve the problem by taking advantage of the imbedded annuity in the future cash flows.
$270,019
$269,563
$272,798
$271,244
Question 16
Assume a prevailing discount rate of 7%, what is the modified internal rate of return (MIRR) for this series of cash flows?
Year Cash Flow
CY ($450,000)
CY + 1 $79,000
CY + 2 $125,000
CY + 3 $140,000
CY + 4 $135,000
CY + 5 $45,000
5.48%
6.15%
7.63%
8.02%
Question 17
How many categories of contributing factors are parts of a Fish Bone chart?
3
4
7
9
Question 18
Which chart is a vertical histogram that lists the most common problems or problem causes in descending order based on the premise that 80% of the trouble comes from 20% of the problem?
run chart
Pareto chart
control chart
flow chart
scatter diagram
Question 19
Which chart is used to illustrate the relationship between two variables and can suggest associative properties?
run chart
Pareto chart
control chart
flow chart
scatter diagram
Question 20
Which chart is used to illustrate patterns of data collected over time and is intended to indicate patterns?
run chart
Pareto chart
control chart
flow chart
scatter diagram
Question 21
Which external factor in healthcare strategic planning is concerned with natal, mortality, and morbidity statistics?
socioeconomic
epidemiologic
economic
environmental
demographic
Question 22
Which external factor in healthcare strategic planning is concerned with income and education level?
socioeconomic
epidemiologic
economic
environmental
demographic
Question 23
Which type of planning focuses on space issues?
community
operational
business
master
strategic
Question 24
Which type of planning focuses on a community of population over a 10-year horizon?
community
operational
business
master
strategic
Question 25
Which type of planning focuses on resource allocation decisions to achieve goals and objectives?
community
operational
business
master
strategic
