You must evaluate a proposed spectrometer for the R&D department. The base price

Question

You must evaluate a proposed spectrometer for the R&D department. The base price is $240000, and it would cost another $36000 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 $120000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $8000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $44000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent.
$
What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.
in Year 1 $
in Year 2 $
in Year 3 $

Explanation / Answer

Check it,may be helpful to you 1st year, before tax = 44000-91080 = -47080 After tax and depreciation = 44000 1st year cash flow = $44000 2nd year, before tax = 44000-83214 = -39214 After tax and depreciation = 44000 2nd year cash flow = $44000 3rd year, savings before tax = 44000-15255 = 28745 Savings after tax and depreciation = 44000 sales in last year = 120000 tax cut on that = 13419.6 3rd year cash flow = $150580.4

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