1. A hospital is planning to invest in a new MRI machine that costs $2

million and has an expected useful life of 10 years. The hospital expects

to generate $300,000 in annual net cash flows from the machine. The

hospital's cost of capital is 8%. What is the net present value (NPV) of

the investment?

a) $519,168

b) $800,000

c) $1,481,832

d) $2,000,000

Answer: A. NPV = -$2,000,000 + ($300,000 / 0.08) * (1 - 1 / 1.08^10) =

$519,168. NPV is the difference between the present value of cash

inflows and the present value of cash outflows. A positive NPV indicates

that the investment is profitable and should be accepted.

2. A nurse manager is responsible for allocating the budget for her

department. She has to decide how to allocate $100,000 among four

activities: staff training, equipment maintenance, quality improvement,

and patient satisfaction. She uses a scoring model to rank each activity

based on its importance and urgency. The scores are shown in the table

below.

| Activity | Importance | Urgency | Score |

|-----------------|------------|---------|-------|

| Staff training | 10 | 8 | 80 |

| Equipment maintenance | 9 | 9 | 81 |

| Quality improvement | 8 | 7 | 56 |

| Patient satisfaction | 7 | 6 | 42 |

How much money should she allocate to each activity?

a) $40,000 for staff training, $41,000 for equipment maintenance,

$10,000 for quality improvement, and $9,000 for patient satisfaction.

b) $32,258 for staff training, $32,742 for equipment maintenance,

$17,742 for quality improvement, and $17,258 for patient satisfaction.

c) $25,806 for staff training, $26,129 for equipment maintenance,