You must evaluate a proposed prism spectroscope for the R&D department of the Van Avery Prep. The base price is $140,000
Posted: Sun Apr 10, 2022 8:44 am
You must evaluate a proposed prism spectroscope for the R&D
department of the Van Avery Prep. The base price is $140,000, and
it would cost another $30,000 to modify the equipment for special
use by the firm. The equipment falls into the MACRS 3-year class
(33%,45%,15%). and would be sold after 3 years for $60,000. The
equipment would require an $8,000 increase in net working capital
(spare parts inventory). The project would have no effect on
revenues, but it should save the firm $50,000 per year before-tax
labor costs. The firm’s marginal federal-plus-state tax rate is 30
percent. What is the terminal cash flow in Year 3?
a.
$60 500
b.
$45 570
c.
no one of the answers
d.
$53 570
department of the Van Avery Prep. The base price is $140,000, and
it would cost another $30,000 to modify the equipment for special
use by the firm. The equipment falls into the MACRS 3-year class
(33%,45%,15%). and would be sold after 3 years for $60,000. The
equipment would require an $8,000 increase in net working capital
(spare parts inventory). The project would have no effect on
revenues, but it should save the firm $50,000 per year before-tax
labor costs. The firm’s marginal federal-plus-state tax rate is 30
percent. What is the terminal cash flow in Year 3?
a.
$60 500
b.
$45 570
c.
no one of the answers
d.
$53 570