7. Calculate the effective (after tax) cost of debt for a for-profit healthcare provider, assuming that the interest rate set on its debt is 11% and its tax rate is 0%.

89%

11%

8.9%

1.1%

8.

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.

Shipping and installation costs associated with the new service.

The value of floor space needed for the project.

Revenues from an existing service that would be lost as a result of the new service.

An increase in inventory costs that would result if the project is undertaken.

10.

Calculate the effective (after tax) cost of debt for a for-profit healthcare provider, assuming that the interest rate set on its debt is 11% and its tax rate is 20%.

8.8%

80%

8%

88%

11.

Calculate the effective (after tax) cost of debt for a for-profit healthcare provider, assuming that the interest rate set on its debt is 11% and its tax rate is 40%.

6.6%

2.9%

66%

89%

12.

Which of the following statements about project cash flow estimation is correct?

The current value of land purchased in the past is not a relevant cash flow because the price paid for the land is a sunk cost.

Depreciation expense can be ignored when estimating project cash flows within not-for-profit organizations.

The impact of the project on other project cash flows can be ignored within not-for-profit organizations.

If inflation is ignored when estimating a project's cash flows, the project's profitability typically will be overstated.

Because capital investment analysis involves the price paid for new long-term assets, shipping charges are not considered.