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Which of the following statements best describes the difference between qualitative and quantitative risk analysis? A Qualitative analysis determines which risks require responses, and quantitative determines which need further analysis. B Qualitative risk focuses on the individual risk, and quantitative risk focuses on the effect of combinations of risks. C Qualitative analysis determines how much contingency reserve is needed, and quantitative establishes risk thresholds. D Both will vary based on the risk tolerance levels of key stakeholders. Which of the following statements about capital rationing ismost correct?Selected:a. Capital rationing occurs when a business does not have the capitalnecessary to fund all acceptable projects.This answer is correct.b. Capital rationing occurs when a business has more capital available than neededto fund all acceptable projects.c. Under capital rationing, the typical approach is to accept all projects with negativeNPVs.d. Both a. and b. are correct.e. Answers a., b., and c. are correct.Correct. Capital rationing occurs when a business does not have the capital necessary to fund allacceptable projects is the most correct statement about capital rationing. 0/1Question 2What does the nature of a project’s component cash flow distributions and their correlation with oneanother determine? Get answer to your question and much more Try again. This was reviewed in Chapter 12 inUnderstanding Healthcare Financial Management.1/1 
Try the multiple choice questions below to test your knowledge of Chapter 14. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. If your lecturer has requested that you send your results to them, please complete the Routing Information found at the bottom of your graded page and click on the 'E-Mail Results' button. Please DO NOT forward your results unless your lecturer has specifically requested that you do so. This activity contains 20 questions.Upgrade to remove ads Only ₩37,125/year
Terms in this set (36)Which of the following are steps in a capital investment financial analysis? All of the above - correct Estimate the projects cash flows
WeCare HMO is evaluating a new project. It has a coefficient of variation (CV) of 5, while the HMO's average project has a CV of 2-3. The business's corporate cost of capital is 9 percent, and the typical adjustment for project risk is 3 percentage points. What is the project cost of capital? (Hint: CV is a measure of project risk.) 12% which of the following is not a relevant cash flow when estimating the incremental cash flows for a new hospital service? The cost of a consultant's report concerning the feasibility of the service that was completed (and paid for) in the previous year. Which of the following statements about the qualitative approach to project risk assessment is most correct? All of the above - correct Qualitative risk assessment involves the
answers to a number of yes/no questions. A medical group practice is considering offering a new service with risk that is greater than the current risk of business. In evaluating this decision, the decision maker should___________________________. Increase the cost of capital applied to the project to make it higher than the business's corporate cost of capital. Which of the following statement about capital rationing is most correct? Capital rationing occurs when a business does not have the capital necessary to fund all acceptable projects. In project cash flow estimation, strategic value is defined as the value inherent in projects that are large in comparison to the business's average project. False The best way to incorporate inflation in a project's cash flows is to assume neutral inflation - that is, to assign the same rate of inflation to all cash flows. False Which of the following statement about project cash flow estimation is most correct? Depreciation expense can be ignored when estimating project cash flows within not-for-profit organizations. Which of the following statements about project risk analysis techniques is most corrects? Scenario analysis considers the joint (combined) impact of changes in uncertain input variables on profitability. Sensitivity analysis measures the risk of a project by showing how much the project's NPV (or IRR) is affected by changes in input variables such as volume and labor costs. other things held constant, with changes in the input variable plotted on the horizontal axis and NPV plotted on the vertical axis, the steeper the sensitivity line, the more sensitive the project's profitability is to the input variable. True Which of the following statements about project cash flow estimation is incorrect? Sunk costs should be included. Which of the following statements about financial risk is incorrect? The higher the risk, the lower the project cost of capital (discount rate). Which of the following statements about project classifications is most correct? Both A and B A- Projects are classified by purpose, such as replacement projects. Two years ago, you invested $1,000 in healthcare stock. Your return during the first year was -50 percent, and your return in the second year was +50 percent. Your investment is now worth $1,000. False As the discount rate applied to a single amount (lump sum) future value increases, the present value ________________________. Decreases What is the future value of a $100 lump sum invested for five years in an account paying 10 percent interest? $161.05 The internal rate of return (IRR) of a capital investment ____________________. must exceed the project cost of capital to make the investment financially acceptable Assume that your organizations CFO has just completed a presentation to the board of trustees concerning the analysis of a proposed ambulatory surgical center costing $2 million. During the presentation, the CFO indicated that the project had an NPV of $786,339 and an IRR of 17.3 percent. Based on its risk, the project was judged to have a cost capital of 13 percent. Which of the following statements is most correct? The project is financially acceptable because its NPV is positive. What is the present value of a $100 lump sum to be received in five years if the opportunity cost rate is 10 percent ? $62.09 You have estimated the value of a planned project by finding the present value (PV) of all the cash inflows from that project. Which of the following would cause the project to look more appealing (have a greater NPV)? The discount rate decreases. Which of the following statements about payback (payback period) is most correct? All of the above - Correct Payback is a measure of time breakeven. For the investor owned business, a capital investment financial analysis identifies this projects that are expected to contribute to the owner (shareholder) wealth. True Which of the following statements about opportunity cost is incorrect? Say you inherited $10,000; because this money cost you nothing, it has an opportunity cost rate of zero. The cost of debt capital to a business is measured by which of the following? Interest rate Although many factors influence the interest rate set on a loan, the two most important are risk and inflation. True Long-term debt is defined as having a maturity of more than six months. False Although the use of financial leverage (debt financing) can increase the return to the owners of a business, it also increase the riskiness of their equity investment. True Which of the following statements about debt financing (financial leverage) is incorrect? Capital structure theory allows managers to precisely determine the optimal capital structure for any for-profit business. Which of the following statements about short-term debt is most correct?
Short-term debt generally has a lower cost than long-term debt. Municipal bonds are essentially the same as corporate bonds. Thus, the coupon (interest) set on a not-for-profit hospital bond will be the same (for all practical purposes) as the rate set on a similar for-profit hospital bond. False Which of the following statements about debt contracts is most correct? Both a and b are correct A- Debt contracts have several different names A call provision allows bondholders to tender (turn in) their bonds at any time to receive the principal amount in return. False Which of the following statements about debt ratings is most correct? The ratings reflect the probability of default. Which of the following statements about common stock is incorrect? The claim of shareholders on cash flows of the firm is limited to the dividends that they receive - that is, they have no claim on the business's residual earnings. Which of the following are basic sources (forms) of capital? Both A and B A- Debt Students also viewedChapter 14/15 Healthcare Finance40 terms Spencer_Castro Quiz 11,12,1336 terms heathkat Cohe 6610, Quiz 5 ch 15-1769 terms alisha_megan HSMA 4055 Quiz 617 terms tennysonr16 Sets found in the same folderExam 237 terms fletchjo HIM 222-450: Chapter 5 Quiz Review10 terms hamidaj96 Reimbursement Ch. 787 terms jdyoung12 HIM 300010 terms Lacey_May44 Other sets by this creatorVQ113 terms fletchjo Exam 435 terms fletchjo Other Quizlet setsMicrobiology Exam #2 - Dr. Weaver64 terms Karsen_HayesPlus A&P 102 Ch 13-1550 terms Stephanie_Facemyer Chapter 612 terms mptatem Week 4: Intellectual Property12 terms easy_mode_loki Which of the following techniques provides the most information about a projects riskiness?Scenario analysis allows for the calculation of a project's coefficient of variation so that the riskiness of projects can be compared to the firm's average project. Scenario analysis provides all necessary information about both a project's risk and profitability in a single step.
Which of the following statement about capital rationing is most correct?Which of the following statements about capital rationing is most correct? Capital rationing occurs when a business does not have the capital necessary to fund all acceptable projects.
Which of the following statements about capital investment project scoring is most correct group of answer choices?The answer is: E. Project scoring combines the payback, net present value, and internal rate of return values to create a single measure of financial attractiveness.
Which of the following statements is true of the internal rate of return approach to assessing investments?Which one of the following is true of the internal rate of return (IRR) approach to assessing investments? IRR fails to take all relevant future cash flows into account.
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Which of the following statements about project risk analysis techniques is most correct?
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