Question
Casio Medical Center is considering investing $98,500 in new dietary equipment to replace its present equipment, which is completely depreciated and outdated. An alternative to
Casio Medical Center is considering investing $98,500 in new dietary equipment to replace its present equipment, which is completely depreciated and outdated. An alternative to this investment is a long-term contract with a local firm to perform the hospital's dietary service. It is expected that the hospital would save $19,675 per year in operating costs if the dietary service was performed internally, vs. contracting it out. Both the expected life and the depreciable life of the projected equipment are 6.5 years. Salvage value of the present equipment is expected to be zero. Assuming that Casio Medical Center can borrow and invest money at 8%, calculate the discounted payback. Show work.
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