Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Check My Work ED eBook Problem Walk-Through New-Project Analysis The president of the company you work for has asked you to evaluate the proposed acquisition
Check My Work ED eBook Problem Walk-Through New-Project Analysis The president of the company you work for 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 $63,000, and it would cost another $19,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $29,800. The MACRS rates for the first 3 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 $2,950. The machine would have no effect on revenues, but it is expected to save the firm $19,330 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dallar. a. What is the Year-O net cash flow? $ b. What are the net operating cash flows in Years 1, 2, and 3? Do not include recovery of NWC or salvage value in Year 3's calculation here. Year 1: Year 2: S Year 3 S C. What is the additional cash flow in Year 3 from NWC and salvage? $ d. If the project's cost capital is 12%, what is the NPV the project? $ Should the chromatograph be purchased? -Select- Check My Work
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started