HAC Capital Planning & Investment Analysis 3

Question 1

A healthcare system is considering replacing aging CT equipment. Which analysis best captures the financial impact of NOT replacing the equipment (opportunity cost)?

Accepted Answer

Differential (incremental) cost analysis

Answer

Differential analysis compares the costs and revenues of keeping old equipment versus replacing it, capturing all incremental changes.

Question 2

Under the Modified Accelerated Cost Recovery System (MACRS), medical equipment classified as 5-year property receives accelerated depreciation primarily to:

Accepted Answer

Improve early-year tax deductions and cash flow

Answer

MACRS front-loads depreciation deductions, reducing taxable income and improving cash flow in early project years.

Question 3

A hospital's capital committee requires a minimum Debt Service Coverage Ratio (DSCR) of 1.5x for new projects. A proposed project generates $900,000 annual net income with $200,000 depreciation and requires $600,000 in annual debt service. What is the DSCR?

Accepted Answer

1.83x

Answer

DSCR = (Net Income + Depreciation) / Debt Service = ($900,000 + $200,000) / $600,000 = $1,100,000 / $600,000 = 1.83x.

Question 4

In a sensitivity analysis for a capital project, which variable having the greatest impact on NPV indicates the highest risk exposure?

Accepted Answer

The variable whose change causes the largest NPV swing

Answer

Sensitivity analysis identifies critical variables by measuring how much NPV changes when each variable is altered, highlighting the greatest risk drivers.

Question 5

A not-for-profit hospital issues tax-exempt revenue bonds at 4.5% to fund a new wing. A for-profit competitor borrows at 6.5%. This difference in borrowing cost primarily reflects:

Accepted Answer

Tax-exempt status of bond interest income for investors

Answer

Investors accept lower yields on tax-exempt bonds because interest income is not subject to federal income tax, lowering borrowing costs for eligible issuers.

(HAC) Healthcare Accounting Certification Practice Test

(HAC) Healthcare Accounting Certification Practice Test

HAC Capital Planning & Investment Analysis 3