Compute the payback period for new piece of equipment for an outpatient orthopedic clinic based on the
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Question:
Compute the payback period for new piece of equipment for an outpatient orthopedic clinic based on the following assumptions:
1. Purchase price of the new equipment = $135,000
2. Useful life = 3 years
3. Revenue = $300,000 (annual)
4. Direct operating costs = $125,000 (over the useful life)
5. Depreciation annually = $45,000
6. Net income is taxed at 25% if net income before taxes is greater than $150,000
7. The state has no income tax
Should the clinic invest in this new equipment? Why or why not? Show your work.
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