A medical diagnostic laboratory plans to spend $1,900,000 on…
A medical diagnostic laboratory plans to spend $1,900,000 on equipment to provide pathology services. The equipment will be depreciated using the MACRS method and a 5-year recovery period. Gross income is expected to be $750,000 in year 1 and increase by $30,000 each year. Annual operating expenses are expected to be $150,000 in year 1 and increase by $20,000 each year. The company’s combined marginal tax rate is 39%. The company uses a study period of 6 years for these purchases and plans to keep the equipment indefinitely. (Round all dollar answers to nearest dollar.) For Year 2, what is the cash flow before taxes, CFBT2? $ For Year 2, what is the deprecation rate, α2? (four decimals) For Year 2, what is the depreciation charge, D2? $ For Year 2, what is the taxable income, TI2? $ For Year 2, what is the amount of taxes, Taxes2? $ For Year 2, what is the cash flow after taxes, CFAT2? $ Refer to the CFAT summary below. Use the CFAT that you calculated in part (f) for year 2. What is the after-tax Rate of Return over the study period? % (one decimal) Year CFAT,$ 0 −1,900,000 1 514,200 2 CFAT2 from part (f) 3 520,472 4 469,663 5 475,763 6 439,182 h. If their MARR is 14%, should the lab invest in this equipment? (YES or NO)