Overview
Answer all the Questions. (Word Limit-2000-3000 words)
As an aspiring manager you are tasked with creating a report which covers the following
topics:
1. Discuss and assess the importance of accounting and finance functions in the
operations of a healthcare organization, either in the public or private sector.
(5 marks)
2. Within academic literature it is said that the primary objective of a company is
maximise the owner’s wealth.
Critically discuss why a healthcare organisation is unlikely to pursue a strategy of
Shareholder Wealth Maximisation. (11 marks)
(note: if your organisation is government owned/funded, they are effectively the
majority shareholder)
3. Bahrain Sovereign Fund is looking to take on a new investment offering private
healthcare treatments.
The company will evaluate two mutually exclusive projects, whose details are given
below. The company’s cost of capital is 8%.
BD Millions Project A Project B
Initial Investment (150) (225)
Year 1 50 140
Year 2 60 120
Year 3 60 60
Year 4 100 30
Year 5 95 10
Calculate the Payback period
Calculate the Net Present Value (NPV) of both projects
(12 marks)
3b. Critically discuss the merits of each investment appraisal method, then discuss the
result of the evaluations you have made of the two projects and advise the company
which project should be undertaken
(11 marks)
4
4. Critically evaluate the use of a Balanced Scorecard in your organisation (or a
previous organisation you have worked in)
a. Outline the Key Strategy (What is the overall goal?)
b. Develop a series of metrics based on Financial Performance, Customer,
Internal Processes and finally Learning and Growth
c. Explain and identify how your Key Performance Indicators (KPIs) will meet
the strategy goals
d. Evaluate the challenges, discuss the risks of your organisation within the
Balanced Scorecard and the challenges to achieving the goals in point 4c
(30 marks)
5. Jeddah Hospital Trust is considering an investment into Hospital Information
System, it has two choices via leasing or buying the software and equipment.
The purchase price is SAR 950,000 and the machine has a 6-year life. If it buys the
software Jeddah Hospital Trust will need to fund it using capital that costs them 7% per
year. Manama estimates maintenance of the system will be SAR 25,000 per annum.
Alternatively, the lease payments will be SAR 220,000 per year for 6 years with rentals
payable at the start of each year.
a. What are the respective present value costs of purchasing the machine or leasing it?
(7 marks)
b. Consider the theoretical cost of Debt, Preference Shares and Ordinary Shares rank them
from most expensive to cheapest.
(7 marks)
c. Recently one of your company directors has attended a finance conference, on their
return the director has decided the company should fund all projects with internal sources
of financing as they are essentially ‘free’. Critically discuss if you agree with this
statement.