1. What are the NPV, IRR, MIRR, and payback of the proposed ambulatory surgery center? Do the
measures indicate acceptance or rejection of the proposed ambulatory surgery center?
2. Inflation is one of the most difficult factors to deal with in project analysis.
a. Complete the inflation impact table shown in Exhibit 20.2.
b. What is management information provided by the inflation impact table?
3. One board member wants to make sure that a complete risk analysis, including sensitivity and scenario
analyses, is performed before the proposal is sent to the board.
a. Perform a sensitivity analysis.
b. What is management information provided by the sensitivity analysis?
4. a. Perform a scenario analysis.
b. What is management information provided by the scenario analysis?
c. Why is the expected NPV obtained in the scenario analysis different from the base case NPV?
5. A board member is interested in the utilization breakeven of the Center.
a. What are the breakeven values of the three input variables that are highly uncertain?
b. What is management information provided by the breakeven analysis?
6. To help with the risk-incorporation phase of the analysis, Jules consulted with Mark Hauser, the
hospital’s CFO, about both the risk inherent in the hospital’s average project and how the hospital
typically adjusts for risk.
a. What is the project’s differential risk-adjusted NPV?
b. Assess the corporate risk of the project. (No calculations are required. Think about correlation of the
surgery center and hospital cash flows.)
7. Jules Bergman is aware that there are some qualitative factors that are relevant to the surgery center
a. What qualitative factors might support project acceptance?
b. What qualitative factors might preclude project acceptance?
c. Can you think of any costs that might be associated with the project that have not been included in
d. Are there any potential benefits that have not been included?
e. What additional data would you seek from other hospital staff members to conduct a more thorough
8. Considering all points, would you build the ambulatory surgery center?