In order to expand tele-health services, a provider must inv…
In order to expand tele-health services, a provider must invest in technology for video and audio calls. The cost for the new equipment is $1,900,000. The equipment would be depreciated as a 5-year property using the MACRS method. Gross income from this investment 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 provider’s combined marginal tax rate is 39%. The provider uses a study period of 6 years for these purchases and plans to keep the equipment indefinitely. What is the cash flow after taxes for Year 2? $ (round to nearest dollar) Refer to the CFAT summary below. Use the CFAT that you calculated in (a) for Year 2. What is the after-tax Rate of Return over the study period? % (round percentage to one decimal) If their MARR is 14%, should the provider invest in this equipment, YES or NO? Year CFAT,$ 0 −1,900,000 1 514,200 2 (a) CFAT 3 520,472 4 469,663 5 475,763 6 439,182