Saint Elsewhere Community Hospital is considering investing $90,000 in new transcription equipment to replace its present equipment, which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local transcription firm to perform the transcription service. It is expected that the hospital would save $20,000 per year in operating costs if the transcription was performed internally. The expected and depreciable life of the equipment is 6 years. Assuming that Saint Elsewhere can borrow or invest money at 8%, calculate the payback year.

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The Answer of Saint Elsewhere Community Hospital is considering investing $90,000 in new transcription equipment to replace its present equipment, which is completely depreciated and outmoded. An alternative to this investment is a long-term contract with a local transcription firm to perform the transcription service. It is expected that the hospital would save $20,000 per year in operating costs if the transcription was performed internally. The expected and depreciable life of the equipment is 6 years. Assuming that Saint Elsewhere can borrow or invest money at 8%, calculate the payback year.

Saint Elsewhere Community Hospital Is Considering Investing $90,000 in New