Find the NPV and IRR of this investment proposal

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Question - A new MRI machine costs $3 million. You have a 4-year planning horizon based on your expected usage of the machine. The machine falls in 5-year MACRS with annual depreciation of 20%, 32%, 19.2%, & 11.52% (17.28% remains on the books at t=4).

The machine costs $3 million and is expected to have a market value of $800,000 in real terms (that is, in today's dollars) at t=4.

Revenues are expected to average $2,000 per scan in the 1st year of operation and will grow with inflation thereafter. You plan to run 10 scans per day on 300 days each year.

The corporate income tax rate is 21%. Expected annual inflation is 2%. Your opportunity cost of capital is 6%.

Required - Find the NPV and IRR of this investment proposal.

Reference no: EM132920679

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