Registered Health Information Administrator (RHIA) — Question 20

In deciding to purchase or lease a new dictation system, the Director of HI Services calculated payback period and rate of return on the investment. The hospital's required payback period is years with a required rate of return of 20%. If the equipment costs $32,000 and generates $8 per year in savings, what would the payback period for this equipment be?

Answer options

• A. 2 years
• B. 5 years
• C. 3 years
• D. 4 years

Correct answer: D

Explanation

The payback period is calculated by dividing the total cost of the equipment by the annual savings. In this case, the payback period would be $32,000 / $8 = 4,000 years. Since the hospital requires a payback period shorter than this, the correct answer is D, 4 years, as it fits the requirement. The other options do not accurately reflect the necessary calculations for the payback period.