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The following information has been gathered on the costs and effectiveness of the two treatments, A and B. In this problem, costs and consequences are not discounted.
|
|
Treatment A |
Treatment B |
|
Mortality rate |
2% |
5% |
|
Life expectancy for survivors |
20 years |
10 years |
|
Initial treatment cost |
$10,000 |
$3,000 |
|
Follow up costs, year 1 |
$5,000 |
$1,000 |
|
Annual follow up costs, all subsequent years |
$1,000 |
$500 |
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- . A hospital director is considering two alternative investment programs. Both have costs of $5,000 in year 1 only. Project 1 provides benefits of $2,000 in each of the first 4 years only. Project 2 provides benefits of $ 2,000 for years 6 to 10 only. a. Compute the net benefits using a discount rate of 6 percent. b. Knowing that the calculations are dependent on the discount rate, conduct a sensitivity analysis by re - calculating with a discount rate of 12 percent. Based on your calculations, which investment program should the director choose?Below are the projected revenues and expenses for a new clinical nurse specialist program being established by a hospital. Nurses would provide education while the patient is in the hospital and home visits after patient discharge on a fee-for-service basis. Should the hospital undertake the program if its required rate of return is 12%? Year 1 Year 2 Year 3 Year 4 Total Revenue costs 100,000 150,000 200,000 250,000 700,000 150,000 150,000 150,000 150,000 600,000 (50,000) 0 50,000 100,000 100,000Drug Y is a new agent for a rare fatal disease. Drug Y is said to cost more but more effective than Drug X, which is used for the same disease. On the average Drug X can extend life for 5 years at a cost of $10,000 while Drug Y can extend life for 6 years at a cost of $80,000 Previous research has shown that quality of life of people living with the disease is 0.3. Calculate the QALYs associated with each drug.
- The hospital is considering the purchase of imaging equipment worth $25,000 to improve its visual capture results, and improve outcomes. The operating costs will be reduced by $7,000 per year. The computer has an estimated life expectancy of 5 years, and an estimated salvage value of $5,000. What is the profitability index if the discount rate is 8%. Ignore reimbursement considerations.6. Compare the following three alternatives by the IRR method, given MARR of 6%/year. First find if they are feasible and then compare them with the incremental rate of retum method (AROR). Construction cost S Benefits S/yr Salvage S Alt. Service Life (yrs) 510,000 145,000 -10,000 775.000 155,000 15,000 1,075,000 165,000 20,000 6.Problem 3) Given 2 alternatives: ineleviupe erf B First Cost 4,000 1,000 2,000 6,000 500 Annual Cost Annual Benefit Life 2,200 5 10 aed tedt pnit owT dinom e Salvage If i 10%, find the better alternative computing NPW of both alternatives Assume alternative A is replaced at the end of its useful life. 3,000 1,000
- Keating Hospital is considering two different low-field MRI systems: the Clearlook System and the Goodview System. The projected annual revenues, annual costs, capital outlays, and project life for each system (in after-tax cash flows) are as follows: Assume that the cost of capital for the company is 8 percent. Required: 1. Calculate the NPV for the Clearlook System. 2. Calculate the NPV for the Goodview System. Which MRI system would be chosen? 3. What if Keating Hospital wants to know why IRR is not being used for the investment analysis? Calculate the IRR for each project and explain why it is not suitable for choosing among mutually exclusive investments.There are three alternatives with the following details: A B Investment cost ($) 50 150 110 Uniform annual benefit ($) 28.8 39.6 39.6 Useful life (years) 2 6 4 All alternatives have no salvage value. If the MARR value is 12%, Which alternative will be chosen if the problem is solved using the payback period?Use the following alternatives to develop an incremental analysis choice table and answer the following questions. Alternative A Initial Cost - $15,000 Annual Revenue (Year 1-15) - $2500 Salvage Benefit (Year 15) - $2000 Alternative B Initial Cost - $25,000 Annual Revenue (Year 1-15) - $3500 Salvage Benefit (Year 15) - $5000 1. Determine the incremental rate of return IRRHigh-Low. Provide your answer as a percentage and round to the nearest hundredth. 2. Determine the internal rate of return for the higher cost alternative IRRHigh. Provide your answer as a percentage and round to the nearest hundredth. 3. Determine the internal rate of return for the lower cost alternative IRRLow. Provide your answer as a percentage and round to the nearest hundredth. Please answer all 3.
- A hospital just purchased upgraded software for the Electronic Medical Record surgical dashboard. The additional surgical dashboard application costs $4,000 now, and will require additional annual payments in years 2 through 8 of $1,000, with new monitors that will cost $10,000 in year 3 and 6. Use an interest rate of 12%, compounded annually. Problem 17: For the hospital upgraded software, what is an Annual Series over the 8 year project? $4258 $1805 $4078 $21152A hospital just purchased upgraded software for the Electronic Medical Record surgical dashboard. The additional surgical dashboard application costs $4,000 now, and will require additional annual payments in years 2 through 8, with new monitors that will cost $10,000 in year 3 and Use an interest rate of 12%, compounded annually. What is the present worth in year 0 of the payments and costs if the interest rate is 12% per year?the hospital must decide whether or not to purchase new respirators. These respirators will help patients of covid – 19, and it will reduce the costs to patients at an estimated value of 100,000 Php. The prices of these 3 respirators are 500,000 Php for the first year, 550,000 Php for the second year, and 600,000 Php for the third year. If the interest rate for the acquisition of these respirators is 12%, determine the net present value for these respirators. Using the formula NPV=FV-OCW