Capital Budgeting California Health Center, a for-profit hospital, is evaluating the purchase of a new diagnostic equipment, which costs $600,000 and has an expected life of five years. Average investments in inventory and accounts receivable will be $50,000 and $200,000 respectively, while the average accounts payable balance will be $30,000. The expected before-tax salvage value of the equipment after five years use is $200,000. The equipment will produce an annual revenue of $300,000 each year in years 1-3, and $350,000 in years 4 and 5. All costs excluding depreciation: 22% of revenue Depreciation method: MACRS Year Depreciation 20% 2 32% 3 19% 4 12% 5 11% 6 6% You will multiply the depreciation percentage for each year by the purchase price to get the depreciation expense in dollars for that year. Tax rate: 21% Estimate the project's cash flows for the next five years and calculate the project's NPV, assuming an 11% required rate and decide on the acceptability of this project