You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $110,000, and it wou
Posted: Wed Apr 06, 2022 9:12 am
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $110,000, and it would
cost another $27,500 to modify the equipment for special use by the
firm. The equipment falls into the MACRS 3-year class and would be
sold after 3 years for $49,500. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require an $15,000
increase in net operating working capital (spare parts inventory).
The project would have no effect on revenues, but it should save
the firm $79,000 per year in before-tax labor costs. The firm's
marginal federal-plus-state tax rate is 35%.
Part 1.
What is the initial investment outlay for the spectrometer, that
is, what is the Year 0 project cash flow? Enter your answer as a
positive value. Round your answer to the nearest cent.
Part 2.
What are the project's annual cash flows in Years 1, 2, and 3?
Do not round intermediate calculations. Round your answers to the
nearest cent.
Year 1- $
Year 2- $
Year 3- $
the R&D department. The base price is $110,000, and it would
cost another $27,500 to modify the equipment for special use by the
firm. The equipment falls into the MACRS 3-year class and would be
sold after 3 years for $49,500. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require an $15,000
increase in net operating working capital (spare parts inventory).
The project would have no effect on revenues, but it should save
the firm $79,000 per year in before-tax labor costs. The firm's
marginal federal-plus-state tax rate is 35%.
Part 1.
What is the initial investment outlay for the spectrometer, that
is, what is the Year 0 project cash flow? Enter your answer as a
positive value. Round your answer to the nearest cent.
Part 2.
What are the project's annual cash flows in Years 1, 2, and 3?
Do not round intermediate calculations. Round your answers to the
nearest cent.
Year 1- $
Year 2- $
Year 3- $