Using the Information in the Table Below, When Will Payback

Multiple Choice

Using the information in the table below, when will payback occur? To justify the purchase of a new release of information tracking system, Health Information Management Services (HIMS) wants to calculate the new system's payback period. The cost to operate the current system is $25,000 per year. The proposed cost of the new system for the first year is $35,000 with continuing operation costs per year of $15,000. An increase of $10,000 per year in billing is anticipated with the new system because of the addition of a billing component to the release of information tracking functionality. Data are summarized in the following table:
$$\begin{array} { | l | c | c | c | c | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Curent systern cost } & \$ 25,000 & \$ 25,000 & \$ 25,000 & \$ 25,000 \\\hline \text { New 5ystern cost } & \$ 35,000 & \$ 15,000 & \$ 15,000 & \$ 15,000 \\\hline \text { Yearly difference in cost } & - \$ 10,000 & + \$ 10,000 & + \$ 10,000 & + \$ 10,000 \\\hline \begin{array} { l } \text { Curmulative differences } \\\text { in costs }\end{array} & & & & \\\hline\end{array}$$

A) First year
B) Second year
C) Third year
D) Fourth year