with any formulas and put into a word document, that's the only way I am able to read it. Thank you.

Chapter 10 Assignment page 317 problem10.2

California Imaging Center, a not-for-profit business, is evaluating the purchase of new diagnostic equipment, The equipment, which costs $600,000, has an expected life of five years and an estimated salvage value of $200,000 at that time. The equipment is expected to be used 15 times a day for 250 days a year for each year of the projects life. On average, each procedure is expected to generate $80 in cash collections during the first year of use. Thus net revenues for year 1 are estimated at 15 x 250 x $80 = $300,000.

Labor and maintenance costs are expected to be $100,000 during the first year of operation, while utilities will cost another $10,000 and cash overhead will increase by $5,000 per procedure during the first year. All costs and revenues are expected to increase at a 5 percent inflation rate after the first year. The centers corporate cost of capital is 10 percent.

• Estimate the projects net cash flows over its five-year estimated life. (hint: use the following format as a guide

Year	0	1	2	3	4	5
Equipment Cost
Net Revenue
Less :Labor/Maintenance costs
Utilities Costs
Supplies
Incremental overhead
Operating Income
Equipment Salvage Value
Net Cash Flow

I

• b. What are the projects NPV and IRR? (Assume for now that the project has average risk.)

• Insert your response here.

• c. Assume the project is assessed to have high risk and California Imaging Center adds or subtracts 3 percent points to adjust for project risk, Now , what is the projects NPV? Does the risk assessment change how the projects IRR is interpreted?

Insert your response here.