California Health Center, a for-profit hospital, is evaluating the purchase of new diagnostic equipment. The equipment, which costs $600,000, has an expected life of five years and an estimated pretax 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 collections, which is net of bad debt losses and contractual allowances, in its first year of use. Thus, net revenues for Year 1 are estimated at 15 X 250 X $80 = $300,000. Labor and maintenance 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, except depreciation, are expected to increase at a 5 percent inflation rate after the first year. The equipment falls into the MACRS five-year class for tax depreciation and hence is subject to the following depreciation allowances: Year Allowance 1 0.2 2 0.32 3 0.19 4 0.12 5 0.11 6 0.06 The hospital's tax rate is 40 percent, and its corporate cost of capital is 10 percent. a. Estimate the project's net cash flows over its five-year estimated life. b. What are the project's NPV and IRR? (Assume that the project has average risk.) (Hint: Use the following format as a guide.)

(Hint: Use the following format as a guide.)
5%	inflation rate					Year
				0	1	2	3	4	5
Equipment cost				($600,000)
Net revenues					300000.00	315000.00	330750.00	347287.50	364651.88
Less:	Labor/maintenance costs				-100000.00	-105000.00	-110250.00	-115762.50	-121550.625
	Utilities costs				-10000.00	-10500.00	-11025.00	-11576.25	-12155.06
	Supplies				-18750.00	-19687.50	-20671.875	-21705.47	-22790.74
	Incremental overhead				-5,000	-5250.00	-5512.50	-5788.125	-6077.53
	Depreciation				($120,000.00)	($192,000)	($114,000)	($72,000)	($66,000)
Operating income
Taxes
Net operating income
Plus: Depreciation
Plus: After-tax equipment salvage value*
Net cash flow
*
Pretax equipment salvage value
MACRS equipment salvage value
Difference
Taxes
After-tax equipment salvage value I am not sure how to get to the operating income which changes the remainder of the data...