00,000 21. Calexico Hospital plans to invest in a new MRI. The cost of the MRI is $3,000,000. The machine. has an economic life of five years, and it will be depreciated over a five-year life to a $500,000 Len salvage value. Additional revenues attributed to the new machine will amount to $3,000,000 per year for five years. Additional operating costs, excluding depreciation expense, will amount to bhavillion $2,000,000 per year for five years. Over the life of the machine, net working capital will increase by $40,000 per year for five years. 30,000 * Net working captital - 40,000.- * Additional Rev3.000.cod for sys Salvage value- 500,000.- Cost-2,000,000 for sy net present value REVIEW QUESTIONS AND PROBLEMS 333 a. Assuming that the hospital is a non-taxpaying entity, what is the project's NPV at a discount rate of 8 percent, and what is the project's IRR? Is the decision to accept or reject the same under either capital budgeting method, or does it differ? b. Assuming that the hospital is a taxpaying entity and its tax rate is 30 percent, what is the project's NPV at a cost of capital of 8 percent, and what is the project's IRR? Is the decision to accept or reject the same under either capital budgeting method, or does it differ? (Hint: see Appendices C, D, and E.) itor decided