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	depreciation		cost of new equipment =			$ 600,000.00
	1	0.2	$ 120,000.00		life of new equipment =			5	years
	2	0.32	$ 192,000.00		salvage value =			$ 200,000.00
	3	0.19	$ 114,000.00		Year 1
	4	0.12	$ 72,000.00		annual revenue year 1=			$ 300,000.00
	5	0.11	$ 66,000.00		cost of salaries =			$ 100,000.00
	6	0.06	$ 36,000.00		utilities =			$ 10,000.00
		1			cash overhead =			$ 5,000.00
					cost of expandable suppies =			$ 5.00	per procedure
								$ 18,750.00	per year
					tax =			40%	WACC
								10%	cost of capital
					cost and revenue increase each year at rate of inflation=			5%
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
			0	1	2	3	4	5
equipment cost			$ (600,000.00)
net revenues				$ 300,000.00	$ 315,000.00	$ 330,750.00	$ 347,287.50	$ 364,651.88
less:
labor/maintenance costs				$ (100,000.00)	$ (105,000.00)	$ (110,250.00)	$ (115,762.50)	$ (121,550.63)
utilities costs				$ (10,000.00)	$ (10,500.00)	$ (11,025.00)	$ (11,576.25)	$ (12,155.06)
supplies				$ (18,750.00)	$ (19,687.50)	$ (20,671.88)	$ (21,705.47)	$ (22,790.74)
incremental overhead				$ (5,000.00)	$ (5,250.00)	$ (5,512.50)	$ (5,788.13)	$ (6,077.53)
depreciation				$ (120,000.00)	$ (192,000.00)	$ (114,000.00)	$ (72,000.00)	$ (66,000.00)
operating income				$ 46,250.00	$ (17,437.50)	$ 69,290.63	$ 120,455.16	$ 136,077.91
taxes				40%	40%	40%	40%	40%
net operating income			$ (600,000.00)	$ 27,750.00	$ (10,462.50)	$ 41,574.38	$ 72,273.09	$ 81,646.75
plus: depreciaiton				$ 120,000.00	$ 192,000.00	$ 114,000.00	$ 72,000.00	$ 66,000.00
Plus: equipment salve value								$ 134,400.00
net cash flow				$ 147,750.00	$ 181,537.50	$ 155,574.38	$ 144,273.09	$ 282,046.75
B	what are the projects's NPV and IRR (assume for now that the project has average risk