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The Safety First Hospital, a non-profit entity, is starting a new heart center.  It is expected that the new heart center will generate $5,000,000 per year in net patient revenues for the next five years.  Operating expenses, excluding depreciation, are estimated $3,000,000 per year.  The initial cost of the heart center building and equipment is estimated at $8,000,000.  The building and equipment will be depreciated over a 5 year life to a cash salvage value of $1,000,000. Required:  What is the Internal Rate of Return (IRR) of the new heart center project?

a)            Approximately 8%

b)            Approximately 9%

c)            Approximately 10%

d)            Approximately 11%

e)            The IRR is greater than 12%

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