Koza Memorial Medical Center $($KMMC$),$ a for$-$profit hospital is contemplating buying a new piece of diagnostic equipment for a total cost of $$1,500,000.$ The expected life of the equipment is seven $(7)$ years with a salvage value of $$500,000.$ KMMC expects a daily volume of $20$ units for $360$ days a year. The hospital expects to collect net patient service revenue per unit of $$125.$

During the first year of operation, labor and maintenance costs are expected to be $$175,000,$ utilities will cost $$50,000,$ other operating costs will amount to $$25,000,$ supply costs are expected to be $$15$ per unit. All costs and revenues are expected to increase at a $5\%$ inflation rate after the first year except for depreciation. KMMC$\text{'}$s tax rate is $30\%,$ and its corporate cost of capital would have been $8\%.$ Consider this project to be an average risk for KMMC$.$

This equipment falls into the MACRS seven years class for tax depreciation and is subject to the following depreciation allowances:

$\backslash$table$[[$Year$,1,2,3,4,5,\mathrm{.}6,7,8,$Total$]]$

Allowance $14\mathrm{.}29\%24\mathrm{.}49\%17\mathrm{.}49\%12\mathrm{.}49\%8\mathrm{.}93\%8\mathrm{.}92\%8\mathrm{.}93\%4\mathrm{.}46\%100\mathrm{.}00\%$