Assume the same facts as in Exercise 21-18 except that City Hospital is a taxpaying entity. The income tax rate is 30% for all transactions that affect income taxes.

Required:
1. Do requirement 1 of Exercise 21-18.
2. How would your computations in requirement 1 be affected if the special-purpose machine had a $10,000 terminal disposal value at the end of 10 years? Assume depreciation deductions are based on the $110,000 purchase cost and zero terminal disposal value using the straight-line method. Answer briefly in words without further calculations.

Data From Exercise 21-18:
City Hospital, a nonprofit organization, estimates that it can save $28,000 a year in cash operating costs for the next 10 years if it buys a special purpose eye-testing machine at a cost of $110,000. No terminal disposal value is expected. City Hospital’s required rate of return is 14%. Assume all cash flows occur at year-end except for initial investment amounts. City Hospital uses straight-line depreciation.