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

master

strategic

Question 24

Which type of planning focuses on a community of population over a 10-year horizon?

community

operational

master

strategic

Question 25

Which type of planning focuses on resource allocation decisions to achieve goals and objectives?

community

operational