Business of Radiology 101

Scenario: Save on Taxes

You purchase your scanner in Year 1. Year 0 is the baseline condition of your business. In the default state, projected financial performance for future years 2 - 5 have been forecasted with the simplistic assumption of fixed net revenues and expenses, and a straight-line depreciation calculation.

• Compared to Year 0, what effect on net income does depreciation expense produce in Years 1-5?
• EXPLAIN

• Change useful life to 3 years. What happens to net income? EBDAT? Change useful life to 10 years. Net income? EBDAT?
• EXPLAIN

*  all values represent 1,000s of dollars.
			Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Net Revenues	Δ
Cost of Sales
Operating Expenses	Δ
Operating Profit (EBIDAT)
Interest Expense
Earnings before Deprec, Amort & Tax (EBDAT)
Depreciation Expense
Tax
Net Income
Cash Flow (cumulative)
Cash Flow (annual)
Net Present Value of Cash Flow	discount rate
Return on Investment
Acquisition Cost			Price	Renovation	IT / PACS	Sales Tax	TOTAL
		$
Scanner Useful Life (yr)
Scanner Residual Value (% of new price)
Financing (Loan) Details			Money Down	Principal	Rate	Term (yr)
	Down Payment
Interest Payment (annual, not monthly)				Year 1	Year 2	Year 3	Year 4	Year 5