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 5 years and an estimated pretax salvage value of $200,000 at that time. The equipment is expected to be use 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 ned of bad debt losses and contractual allowances, in its first year of use. Thus, net revenues for year 1 are estimates at 15*250*$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 of expandable supplies is expected to average $5 per procedure during the first year. all costs and revenue, except depreciation, are expected to incresae at 5% inflation rate after the first year
the equipment falls into the MACRS five-year class for tax depreciation and 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
		1
the hospital's tax rate is 40%, and its corporate cost of capital is 10%
A	estimate the projects net cash flows over its 5-year estimated life (hint: use the following format as a guide)
			Year
equipment cost			0	1	2	3	4	5
net revenues
less:
labor/maintenance costs
utilities costs
supplies
incremental overhead
depreciation
operating income
taxes
net operating income
plus: depreciaiton
Plus: equipment salve value
net cash flow
B	what are the projects's NPV and IRR (assume for now that the project has average risk