Exercise 13-V:Payback

The MHS Chief Financial Officer is considering request by the Emergency Room department for purchase of new equipment. It will cost $500,000. There is no trade-in. Its useful life would be10 years. This type of machine is new to the department but it is estimated that it wil result in 84,000 annual revenue and operating costs would be one-quarter of that amount. The CFO wants to find the payback period for this piece of equipment.