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can the work be shown please The president of MorChuck Enterpriser has asked you to evaluate the proposed acquisition of a new chromatograph for the
can the work be shown please
The president of MorChuck Enterpriser has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R\&D department. The equipment's basic price is $70,000 and it would cost another $15,000 to modify it for special us by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $30,000. The MACRS rates for the first three years are 0.3333 .0 .4445 , and 0.1481 . Use of the equipment would require an increase in net working capital (spare parts inventory) of $4000. The machine would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. a. What is the Year- 0 cash flow? $89,000 b. What are the project recurring cash flows in Years 1, 2, and 3? $25,832.63,$28,195.63,$21,897.13 c. What is the additional (nonoperating) cash flows in Year 3? $28,074.63 d. If the project's cost of capital is 10%, should the chromatograph be purchased? $4,669,11 Step by Step Solution
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