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Dr. David Dunn is adding a new piece of diagnostic equipment to the department. Two similar models are offered by two different vendors, and both models would serve the needs of the clinic. both also have an estimated useful life of five years, with no salvage value at the end of the five years. the only difference is the cost. Model A cost $120,000 est labo saving of &40,000. Model B cost &110,000 Estimated labor savings $32,000. the straight line depreciation is used and a target rate of return of 15% for all equipment with a useful life over two years and a payback period of three years.

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