15 3 Consider the project contained in Problem 14 7 in Chapter 14 (Healthcare Finance, Gapenski, 6th Edition) a Perform a sensitivity analysis to see how NPV is affected by changes in the number of procedures per day, average collection amount, and salvage value b Conduct a scenario analysis suppose that the hospitals staff concluded that the three most uncertain variables were the number of procedures per day, average collection amount, and the equipments salvage value Furthermore, the following data were developed a Scenario Probability Number of Procedures Average Collection Equipment Salvage Value Worst 0 25 10 $60 $100,000 Most Likely 0 5 15 $80 $200,000 Best 0 25 20 $100 $300,000 c Finally, assume that California Health Centers average project has a coefficient of variation of NPV in the range of 1 0 2 0 The hospital adjusts for risk by adding or subtracting 3 points to its 10 corporate cost of capital After adjusting for differential risk, is the project still profitable d What type of risk was measured and accounted for in Parts B and C Should this be of concern to the hospitals managers

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Question: 15.3 Consider the project contained in Problem 14.7 in Chapter 14. (Healthcare Finance, Gapenski, 6th Edition) a. Perform a sensitivity analysis to see how NPV

15.3 Consider the project contained in Problem 14.7 in Chapter 14. (Healthcare Finance, Gapenski, 6th Edition)

a. Perform a sensitivity analysis to see how NPV is affected by changes in the number of procedures per day, average collection amount, and salvage value.

b. Conduct a scenario analysis suppose that the hospitals staff concluded that the three most uncertain variables were the number of procedures per day, average collection amount, and the equipments salvage value. Furthermore, the following data were developed:a.

Scenario	Probability	Number of Procedures	Average Collection	Equipment Salvage Value
Worst	0.25	10	$60	$100,000
Most Likely	0.5	15	$80	$200,000
Best	0.25	20	$100	$300,000

c. Finally, assume that California Health Centers average project has a coefficient of variation of NPV in the range of 1.0 2.0. The hospital adjusts for risk by adding or subtracting 3% points to its 10% corporate cost of capital. After adjusting for differential risk, is the project still profitable?

d. What type of risk was measured and accounted for in Parts B and C? Should this be of concern to the hospitals managers?

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