5.5. You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows: Revenues (10,000 visits) Wages and benefits Rent Depreciation Utilities Medical supplies Administrative supplies $400,000 220,000 5,000 30,000 2,500 50,000 10,000 Assume that all costs are fixed, except supply costs (medical and administrative), which are variable. Furthermore, assume that the clinic must pay taxes at a 30 percent rate. a. Construct the clinic's projected P&L statement. b. What number of visits is required to break even (revenue covers all accounting costs)? c. What number of visits is required to produce an after- tax profit of $100,000?

5.5. You are considering starting a walk-in clinic. Your financial projections for the first year of operations are as follows: Revenues (10,000 visits) Wages and benefits Rent Depreciation Utilities Medical supplies Administrative supplies $400,000 220,000 5,000 30,000 2,500 50,000 10,000 Assume that all costs are fixed, except supply costs (medical and administrative), which are variable. Furthermore, assume that the clinic must pay taxes at a 30 percent rate. a. Construct the clinic's projected P&L statement. b. What number of visits is required to break even (revenue covers all accounting costs)? c. What number of visits is required to produce an after- tax profit of $100,000?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Consider a project to supply 70 units of a product for the next five years. As the center of operations, you can use a building you own that cost $380 five years ago. Selling the building today would give you $330 after tax. If you start the project, you will not be able to sell the building until the project is over. You estimate that selling the building in 5 years will give you $800 after tax. You will also need to install $2,000 in new equipment at the beginning of the project; the equipment will be depreciated straight-line to zero over the project's five-year life. The equipment can be sold for $1,500 at the end of the project. You will also need $35 in initial net working capital for the project, and an additional investment of $33 annually. All net working capital will be recovered when the project ends. Your variable costs are $28 per unit, and you have fixed costs of $560 per year. Your tax rate is 35% and your required return on this project is 10%. If you were to submit a…
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