Assume That There Are 5 Equally Sized Hospitals in a Market

question 10

Multiple Choice

Assume that there are 5 equally sized hospitals in a market area. If two of these hospitals decide to merge, what will be the increase in the Herfindahl-Hirschman index?

• A) 2000
• B) 800
• C) 1600
• D) 2800
• E) 400

---

Definitions:

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment, calculating the present value of cash inflow minus the present value of cash outflow.

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of potential investments based on cash flows.

Project Accepted

A status indicating that a proposed plan or project has been reviewed and granted approval for implementation.

Profitability Indices

Profitability indices are financial tools used to evaluate the efficiency of an investment or to compare the efficiency of multiple projects by calculating the ratio of the present value of future cash flows to the initial investment.