Question
S. Medical is evaluating the purchase of a new diagnostic equipment, which costs $1,200,000, has an expected life of 5 years, and an estimated pretax
S. Medical is evaluating the purchase of a new diagnostic equipment, which costs $1,200,000, has an expected life of 5 years, and an estimated pretax salvage value of $400,000. It is expected to generate $600,000 in its first year of use. In the same year operating expenses without depreciation are expected to be $270,000. The hospitals tax rate is 25%. The equipment falls into the MACRS five-year class for tax depreciation, given in the following table:
Year Allowance
1 0.20
2 0.32
3 0.19
4 0.12
5 0.11
6 0.06
Estimate S. Medical's Year 1 net cash flow
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