New project analysis You must evaluate a proposed spectrometer for the R&D depar

Question

New project analysis

You must evaluate a proposed spectrometer for the R&D department. The base price is $170,000, and it would cost another $25,500 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 $42,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $11,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $68,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.

Explanation / Answer

Year 0 = $170,000 + 25,500 + 11,000 = - $206,500

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.