EXERCISES

• 12-1Using the information inTable 12-7, construct a PERT network and answer each of the following questions:
• a.What is the expected project completion data?
• b.What is the scheduled start and completion date for each activity?
• c.Which activities are on the critical path?
• d.How long can noncritical path activities be delayed without jeopardizing the overall completion date for this project?
• 12-2Assess the impact of the following changes to the time estimates provided in question 12-1. Individually, what is the impact if:
• Activity
• Predecessor
• New Time Estimate
• O. Advertise for new staff
• N
• 4
• P. Interview for new staff
• O
• 6
• Q. Select new staff
• P
• 1
• Collectively, what is the impact of these changes?
• 12-3As project manager for the example included in question 12-1, what would you recommend to preserve the original project completion date if activity A was reestimated to take 8 weeks, not the original 4 weeks? Provide details.
• 12-4Develop a WBS and PERT network with no more than 20 activities for each of the following projects.
• a.Buying a car
• b.Screening 1000 school-age children for high blood pressure and reporting the results to the child's physician

Table 12-7

Project to Convert a 20-Bed Unit in a Nursing Home to Accommodate Patients with Dementia

Activity

Predecessor

Time estimate (weeks)

A

Secure state approval

-

4

B

Identify 20-bed unit to be used

A

1

C

Move existing residents

B

1

D

Clean space

C

2

E

Develop architectural plans

A

9

F

Install new heating and ventilation systems

E

4

G

Install security systems

E

2

H

Move walls; renovate

F

4

I

Identify new equipment

A

1

J

Order new equipment

I

1

K

Unpack and inspect new equipment

J

1

L

Install new equipment

D, K, H

3

M

Reassign staff

A

1

N

Identify new staffing needs

M

1

O

Advertise for new staff

N

3

P

Interview for new staff

O

2

Q

Select new hires

P

3

R

Develop care plan protocols

M

1

S

Train staff

R, Q, M, L

1

T

Modify quality assurance plans

S

2

U

Coordinate with hospital discharge planners

T

4

V

Complete internal audit

U, G

1

Note Homework assignment 12-1 thru 12-3 Math 543

13-1 thru 13-3

EXERCISES

• 13-1A representative of a reputable financial services company has approached you as manager of a four-person group of anesthesiologists with an opportunity to purchase a 10-year annuity due for each member of the group. The annuity due would pay $40,000 each year beginning 5 years from now (i.e., at time = 5). What is the most you would be willing to pay now, per each physician, for this investment? Assume an appropriate discount rate of 7%.
• 13-2The hospital's marketing and finance departments have just provided you, as chief financial officer, with pro forma income statements for your proposed sonogram center. These statements appear in the following.
• Pro forma Income Statement
• (000)
• Time
• t+ 1
• t+ 2
• t+ 3
• t+ 4
• Service Revenues (net)
• $425
• $500
• $580
• $700
• Expenses
• $400
• $450
• $525
• $600
• Depreciation Expense
• $35
• $35
• $35
• $35
• Net Income
• ($ 10)
• $15
• $20
• $65
• What is the project's IRR? Assume an initial investment of $175,000 and an appropriate discount rate of 6%. The hospital is operated as a not-for-profit facility.
• 13-3The chief operating officer (COO) of a small, not-for-profit community hospital has to make a recommendation to the board of trustees on choosing among three project options for an unrestricted gift of $250,000 that has just been received. The board has established a time horizon of 5 years on this project. The options are described in the following.
• a.Purchase a 5-year treasury note at an interest rate (annual) of 7%.
• b.Purchase the practice of a young physician (the hospital's third highest admitter). Estimates of projected cash flows for the practice (post-purchase), are:
• Probability of Cash Flow
• Time
• 60%
• 20%
• 20%
• t+ 1
• $40,000
• $20,000
• $60,000
• t+ 2
• $60,000
• $30,000
• $80,000
• t+ 3
• $75,000
• $40,000
• $100,000
• t+ 4
• $100,000
• $50,000
• $125,000
• t+ 5
• $100,000
• $50,000
• $125,000
• c.Purchase an upgraded analyzer for the laboratory. Based on forecasts of laboratory utilization, the net cash flows for this project are:
• Time
• Net Cash Flow
• t+ 1
• $75,000
• t+ 2
• $75,000
• t+ 3
• $50,000
• t+ 4
• $50,000
• t+ 5
• $50,000
• Which investment should the COO recommend and why?
• 13-4What are some of the factors that can influence the riskiness of projects (investments) in healthcare organizations?