Dermatology Associates of Linwood is moving forward with the acquisition of the second practice discussed in Assignment 1. You have been meeting with Sharon, the second location's practice manager, acquainting her with DAL's operational standards. Sharon expressed concern about the immediate purchase of the Fraxel laser.

Sharon explained that the former practice physician-owner avoided purchasing one, because the return was not worth the investment. With the purchase price averaging $25,000, you definitely understand Sharon's concern, but you also know Fraxel treatments at DAL are one of the leading services contributing to your overall revenue. This is primarily due to the fact that Fraxel treatments are classified as a cosmetic procedure, with payment required upfront from the patient.

• In an Excel document, show Sharon why the investment would be profitable.
• Assume the opportunity cost of capital is 12%.
• Include cash flows for six months
  • Assume the number of treatments you will need to perform each month.
  • The treatment price at DAL's existing clinic is $1,200. You will need to lower this price point to be more appealing to the new practice's patient base.
• Below your calculation, insert a text box and provide the rationale for using the method you used, as well as the new price you set for the treatment. Word it as if you are speaking to Sharon, explaining how profitability is determined.