Dr. Hunter Thompson is considering opening an MRI clinic in Aspen to profit from reckless skiers and snowboarders. The business will operate for three years. For planning purposes, all operating cash flows are assumed to occur at year-end with the first year's flows occurring one year from today. The MRI machine, a GE 3.0T Signa Excite HD, costs $2.52 million and will be delivered immediately and installed for $94,000 (GE expects cash on delivery). Assume that the machine is classified as a 5-year property and can be sold for $505,000 at the end of the three years. (MACRS depreciation rates are shown in the table B) The forecasted number of scans each year is 2,470 and the clinic will charge $700 per scan. Dr. Thompson will lease office space in a local strip-mall. Annual operating expenses are $548,000 for rent, computer equipment leases, labor (receptionist, nurse and technician), maintenance and advertising. Dr. Thompson plans to offer credit to his customers. He expects to have about 45 days of sales in accounts receivable, or about $310,000. The famed venture capitalist, Oscar Acosta, has pledged to provide all of the equity needed for the project with the condition that he receive an annual return of 10.3% on his invested capital. The tax rate is 35%. a. What are initial cash flows for the MRI project? b. What are the operating cash flows in the first year? c. What are the terminal year cash flows (not including the operating cash flows)? d. What is the NPV of the project? a. What are the initial cash flows for the project? Calculate the initial cash flow below: (Round to the nearest dollar.) Year 0 $ Initial purchase price of the new asset Installation/shipping cost of the new asset Net purchase price +/- Change in net working capital $ - $ Initial cash flow