The Complete Cure Hospital is considering buying laboratory equipment with an estimated life of seven years, so they will not have to use outsiders' laboratories for certain types of laboratory work. All of the cash flows affected by the decision are listed below. (The hospital is a nonprofit organization that does not pay taxes.)

Calculate the net present value of this decision using the following schedule. Should the hospital buy the equipment?

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Investment outflows at Time 0... $2,000,000 Periodic operating flows: Annual cash savings because outside laboratories are not used ...... 700,000 Additional cash outflow for people and supplies to operate the equipment ... 100,000 Disinvestment flows: Salvage value after seven years, which is the estimated life of this project 200,000 Discount rate 12%