Question

Physician's Pharmacy is considering the purchase of a copying machine which it will make available to customers at a per-copy charge. The copying machine has an initial cost of $7,500, an estimated useful life of five years, and an estimated salvage value of $500. The estimated annual revenue and expenses relating to operation of the machine are as follows: Revenue $8,000 Expenses other than depreciation..... $5,500 All revenue will be received in cash; expenses other than depreciation will be paid in cash. Depreciation will be computed by the straight-line method. Answer the following questions. If you select answer d, indicate the correct amount in the space provided. YOU WILL NOT RECEIVE CREDIT FOR YOUR ANSWER UNLESS YOU SHOW YOUR WORK! 4 Refer to the above data. Acquisition of the copying machine is expected to increase Physician's annual net income by: a $1,100. C $600. b $500. d Some other amount. Refer to the above data. The annual net cash flow expected from the investment in the machine is: a $1,000. c $500. b $600. d $2,500. 6 Refer to the above data. The payback period on this investment is estimated at: a 1.125 years. C 3 years. b 7.5 years. d None of these answers. 7 Refer to the above data. The expected rate of return on average investment is: a 37.1%. C 60%. b 33 1/3%. d Some other rate.

Answer 1

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