Goal Alignment between Hospitals and the British Government:

Goal Alignment between Hospitals and the British Government:

In 2008, the Labour Party in Britain promised that patients would have to wait for no more than four hours to be seen in an emergency room. The National Health Service started rewarding hospitals that met this performance goal. What do think happened? (HINT: It was not good.). Use the problem-solving principles in Chapter I to suggest a better approach.

Q.2: 2-5 Kraft and Cadbury

When Kraft recently bid $16.7 billion for Cadbury, Cadbury’s market value rose, but Kraft’s market value fell by more. What does this tell you about the value-creating potential of the deal?

Q.3: 3-3 Housing Bubble

Because of the housing bubble, many houses are now selling for much less than their selling price just two to three years ago. There is evidence that homeowners with virtually identical houses tend to ask for more if they paid more for the house. What fallacy are they making?

Q.4: 4-6 Copier Company

A copy company wants to expand production. It currently has 20 workers who share eight copiers. Two months ago, the firm added two copiers, and output increased by 100,000 pages per day. One month ago, they added five workers, and productivity also increased by 50,000 pages per day. Copiers cost about twice as much as workers. Would you recommend they hire another employee or buy another copier?

Q.5: 5-5 Toy Trucks

Last year, a toy manufacturer introduced a new toy truck that was a huge success. The company invested $2.5 million for a plastic injection molding machine (which can be sold for $2.0 million) and $100,000 in plastic injection molds specifically for the toy (not valuable to anyone else). Labor and the cost of materials necessary to make each truck is about $3. This year, a competitor has developed a similar toy that has significantly reduced demand for the toy truck. Now, the original manufacturer is deciding whether they should continue production of the toy truck. If the estimated demand is 100,000 trucks, what is the break-even price for the toy truck? Should you shut down?