Dr. Jones is evaluating whether to open a private MRI clinic in leased office space in a local strip mall. The clinic wi

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Dr. Jones is evaluating whether to open a private MRI clinic in
leased office space in a local strip mall. The clinic will run for
two years and then close. Before the clinic opens, the offices
require $200,000 of renovations. Dr. Jones will buy $20,000 of
computer equipment and one MRI machine. The MRI machine (GE 3.0T
Signa Excite HD) costs $2.4M. Assume that the renovations, computer
equipment and MRI are paid for at the beginning of the first year
(t=0) and that all three are classified as 15-year
property.
Assume that the MRI machine will be sold for $500,000 at the end of
the second year of business. The computer equipment will be
worthless at that time.
The clinic can perform 50 scans per week for 49 operational weeks
per year. The clinic will charge $700 per scan.
The clinic will need two technicians, two receptionists and one
office manager. Wages, salaries and other payroll costs (i.e.,
health insurance premiums) will total $275,000 per year.
Maintenance, supplies, marketing and operating costs for the
machine are expected to be $200,000 per year. Annual rent is
$60,000 payable at the end of each year. Assume that all revenues
(and expenses) occur at the end of the year. The tax rate is 40%
and Dr. Jones' cost of capital is 10%. What are the operating cash
flows at the end of Year 1?

MACRS Depreciation Rates
Answer Choices:
$1,001,480 .00
$910,200.00
$235.990.10
$880,989.50
$760,400.00