Excel Online Structured Activity: New project analysis You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $110,000, and it would cost another $22,000 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 $38,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $11,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $70,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet a. What is the initial investment outlay for the spectrometer, that is, what is the Year O project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sion. b. What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent. In Year 1$ In Year 25 In Year 3$ c. If the WACC is 13%, should the spectrometer be purchased? B D $110,000 $22,000 $38,500 $11,000 $70,000 13.00% 40.00% YO Yr 1 Yr. 2 Yr 3 0.33 0.45 0.15 Yr 0 Yr 1 Yr. 2 Yr 3 Base price Additional modification costs 5 Before-tax salvage proceeds Change in NOWC Before-tax labor cost savings 8 WACC 9 Tax rate 10 11 12 Depreciation rates 13 14 15 16 Base price 17 Modification costs 18 NOWC 19 20 Before-tax labor cost savings 21 Depreciation 22 Operating income 23 Taxes 24 After-tax operating income 25 Add back depreciation 26 Operating cash flows 27 28 Termination cash flows 29 Before tax salvage proceeds 30 Tax on salvage value 31 NOWC recapture 32 Project cash flows 33 34 NPV 35 Project acceptance? $70,000.00 $70,000.00 $70,000.00 $0.00 50.00 $0.00 $38,500.00 $11,000.00 30 A B D E NPV Project acceptance? Formulas Yr. 1 Yr. 2 Yr. 3 Base price Modification costs NOWC Yr 0 #NIA #N/A #N/A $70,000.00 Before-tax labor cost savings Depreciation Operating income Taxes After-tax operating income Add back depreciation Operating cash flows Termination cash flows Before-tax salvage proceeds Tax on salvage value NOWC recapture Project cash flows $70,000.00 #N/A #N/A #N/A #N/A #N/A #NIA $70,000.00 #NA #N/A #N/A #NIA #N/A #NIA #N/A #N/A #N/A #N/A #N/A #N/A $38,500.00 #N/A $11,000.00 WNIA #N/A #N/A #N/A NPV Project acceptance? #N/A UNIA