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 $34,000 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 $9,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $29,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. a.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. $ b.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 $ c.If the WACC is 13%, should the spectrometer be purchased?

Explanation / Answer

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

Related Questions

Navigate

• Browse (All)
• Browse N
• Subjects

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