$2.$ You have been asked by the president of your company to evaluate the proposed acquisition of a spectrometer for the firm$$s R&D department. The equipment$$s base price is $$140,000$ and it would cost another $$30,000$ to modify it for special use by your firm. The spectrometer, which falls into the MACRS $3-$year class $[$see problem $1$ above for annual depreciation rates$],$ would be sold after $3$ years for $$60,000.$ Use of the equipment would require an increase in net working capital $($spare parts inventory$)$ of $$8,000.$ The spectrometer would have no effect on revenues, but it is expected to save the firm $$50,000$ per year in before$-$tax operating costs, mainly labor. The firm$$s marginal federal plus state tax rate is $30\%.$

a$.$ What is the initial investment?

b$.$ What are the net operating cash flows in years $1,2$ and $3?$

c$.$ What is the terminal cash flow?

d$.$ If the project$$s cost of capital is $12\%,$ should the spectrometer be purchased?