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Providence College Healthcare Operations & Hospital Profit Discussion

Providence College Healthcare Operations & Hospital Profit Discussion

You are in a meeting with the hospital’s board of trustees discussing the possibility of investing a portion ($2,000,000) of the hospital’s profit in an industry. After running numbers and discussing with a financial advisor, you learn that there is a 60% chance of a $180,000 return in 1 year. At the same time, there is a 40% chance of losing $240,000 at the end of the same period. Another option is to keep this profit in a bank account with 0.05% interest rate. What would you recommend to the board regarding this investment? Why? (Suppose that there is no other cost associated with the investment, and these two options are the only options available). Use a Decision Tree to depict the alternatives.

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