Acme Imaging Center, a not-for-profit business, is evaluating the purchase of new diagnostic equipment. The equipment, which costs $600,000, has an expected life of five years and an estimated salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for each year of the project's life. On average, each procedure is expected to generate $80 in cash collections during the first year of use. Thus, net revenues for Year 1 are estimated at 15 x 250 x $80 - $300,000. Labor and maintanence costs are expected to be $100,000 during the first year of operation, while utilities will cost another $10,000 and cash overhead will increase by $5,000 in Year 1. The cost for expendable supplies is expected to average $5 per procedure during the first year. All costs and revenues are expected to increase at 5 percent inflation rate after the first year. The center's corporate cost of capital is 10 percent. 0 1 2 3 4 5 Equipment Cost ($600,000) Less: 100,000 10,000 Supplies 18,750 5,000 120,000 $ 46,250 C. 120.000 Net Revenues Labor/maintanence costs Utilities costs Incremental overhead Depreciation Income before taxes Taxes (40%) Project net income Plus: Depreciation Plus: Salvage Value Net Cash Flow ($600,000) $147.750 $181.537 $XXX.XXX $144.274 $282.046 $300,000 $315,000 A. $347,288 $364,652 105,000 110,250 115.762 121,551 10,500 11,025 11,576 12,155 19,688 20,672 21,705 22,791 5,250 5,512 5,788 6,078 192,000 114.000 72.000 66.000 B. $ 69,291 $ 120,457 $136,077 (6.975) $ XX, XXX $ XX, XXX 27,716 48.183 $41,575 $72,274 54.431 $ 81,646 192,000 D. 72.000 66,000 134,400