You are considering starting a walk-in-clinic. Your financial projections for the first year of operations are as follows:

Revenues (10,000 visits) $1,000,000

Wages and benefits 450,000

Rent 100,000

Depreciation 30,000

Utilities 70,000

Cash 25,000

Medical Supplies 80,000

Accounts Receivable 75,000

Assume that all costs are fixed except supply costs, which are variable. Furthermore, assume that the clinic must pay taxes at a 30 percent rate.

1. Explain the difference between a capitalized expenditure and an operating expense.
2. Construct the clinics projected P&L statement. What is its after-tax profit?
3. What number of visits is required to break even pre-tax?
4. What number of visits is required to provide you with an after-tax profit of $200,000?
5. Assume that you have forecasted 25% of your visits from a managed care plan that wants a 30% discount from current charges. What would be the impact on after-tax profit?