Business, 06.05.2020 08:25 fhggggy5680
You must evaluate a proposed spectrometer for the R&D department. The base price is $190,000, and it would cost another $47,500 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 $57,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $13,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $57,000 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 $
If the WACC is 14%, should the spectrometer be purchased?
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You must evaluate a proposed spectrometer for the R&D department. The base price is $190,000, an...
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