Dr. Claudia Gomez, a plastic surgeon, had just returned from a conference in which she learned of a new surgical procedure for removing wrinkles around eyes, reducing the time to perform the normal procedure by 50%. Given her patient-load pressures, Dr. Gomez is excited to try out the new technique. By decreasing the time spent on eye treatments or procedures, she can increase her total revenues by performing more services within a work period. In order to implement the new procedure, special equipment costing $88,800 is needed. The equipment has an expected life of 4 years, with a salvage value of $7,200. Dr. Gomez estimates that her cash revenues will increase by the following amounts:

Year Revenue Increases

1. $23,760

2. $32,400

3. 38,880

4. 38,880

She also expects additional cash expenses amounting to $3,600 per year. The cost of capital is 12%. Assume that there are no income taxes.

Conceptual Connection: Compute the NPV for the project, using 14% as the IRR.