(CO 6) Sunrise is a voluntary, nonprofit, continuing care center. Presently, it has $1,000,000 set aside for replacement of the equipment. Its current accumulated depreciation is $1,500,000, and the average age of the equipment is 5 years. If it can be assumed that capital assets for Sunrise are inflating at 5% per year, what balance would Sunrise need to have set aside today to meet their replacement needs if they will not be using any debt financing?

1.) $1,276,200

2.) $5,000,000

3.) $1,276,282

4.) $7,500,000