How do you think the two projects will fare under Mr. Kleins new capital budgeting technique? As part of your assessment, calculate each projects net present value (NPV) and internal rate of return (IRR). Then fill out Exhibit 2, and complete Exhibit 3.

Exhibit 2. Qualitative Evaluation A. Physician Impact Will this project have an effect on the physicians' attitude toward the hospital? Yes No (If no, proceed to Part B. If so, enter information about the extent of the impact, circle two answers below (one for non-acceptance and one for acceptance), and explain) What is the scope of impact on the physicians? a. One or two physicians will be affected. b. The majority of the physicians in a hospital service will be affected c. A substantial portion of the medical staff will be affected. Explain your answer in a memorandum. Not Accepted: -4 The affected physicians will move their practices to other hospitals. -3 The affected physicians will tend to reduce their practices at the hospital. -2 The affected physicians will be disgruntled and will discuss the lack of the expenditure or project in the community and with other physicians. -1 The affected physicians will be aware of the lack of support for the project, and will be less likely to believe that the hospital is maintaining a proper level of patient care. 0 No effect Accepted: +1 The affected physicians will be aware of the expenditure or project and will be satisfied that the hospital is maintaining a high level of patient care. +2 The affected physicians will be very impressed and will discuss the expenditure or project favorably in the community and with other physicians. +3 The affected physicians will moderately increase their practices at the hospital. +4 The affected physicians will move their practices to the hospital. B. Community Impact Will this project have an effect on the community attitude toward the hospital? Yes No (If no, proceed to Part C. If so, circle two answers be- low: one for non-acceptance and one for acceptance, and +4 Major and widespread positive impact with long-term explain) Not Accepted: -4 Intense and widespread negative reaction in the community will result in a severe blow to the hospital's image. -3 A widespread negative effect on the hospital's general image and reputation will result. -2 The hospital's image will be damaged among certain groups in the community. -1 The attitudes of a few people will be negatively affected. Accepted: +1 Relatively few people will be positively affected. +2 Some community groups will be favorably impressed. +3 A widespread positive effect on the hospital's image and reputation will result. +4 Significant and widespread positive community reaction will contribute significantly to the hospital's reputation. C. Employee Impact Will this project have an effect on the attitude of the hospital's personnel? Yes__ No If yes, circle two answers below: one for non-acceptance and one for acceptance, and explain your answers. Not Accepted: -4 Major and widespread negative impact on employee morale and attitude toward the hospital. -3 Widespread disappointment with the hospital and some negative effects on the hospital's image among employees. -2 A limited group of employees (one or two departments) will react negatively. -1 Relatively few employees will be disturbed. 0 No effect Accepted: +1 Relatively few employees will know about the decision but they will be pleased. +2 A limited group of employees will be very pleased. +3 Nearly all employees will be pleased. effects on employee attitude toward the hospital will result. Exhibit 3. Score Sheet 1 Evaluation Economic Total economic score Qualitative Add positive and negative answers (example: a -2 and a +4 would result in a total of 6 points. Scores therefore can range from 0 to 8 )