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how can I solve for those? You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer
how can I solve for those?
You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $160.000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $31,000. The equipment would require a $10.000 increase in net operating working capital (spare parts inventory The project would have no effect on revenues, but it should save the firm $32,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer, that is what is the Year O project cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar. b. What are the project's annual cash flows in Years 1, 2, and 37 Do not round intermediate calculations. Round your answers to the nearest dollar. c. If the WACC is 139, should the spectrometer be purchased? You must evaluate a proposal to buy a new muling machine. The purchase price of the milling machine, including shipping and installation costs, is $158.000, and the equipment will be hay depreciate at the time of purchase. The machine would be sold after 3 years for $68,000. The machine would require a $7.500 increase in net operating working capital increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $47,000 per year. The marginal tax rate is 25%, and the WACC is 12%. Also, the firm spent $4.500 last year investigating the feasibility of using the machine. a. How should the $4,500 spent last year be handled? 1. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. II. The cost of research is an incremental cash flow and should be included in the analysis. III. Only the tax effect of the research expenses should be included in the analysis. IV. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay V. Last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. -Select- project cash flow? Enter your answer b. What is the initial investment outlay for the machine for capital budgeting purposes after the 100% bonus depreciation is considered, that is, what is the Year as a positive value. Round your answer to the nearest dollar. c. What are the project's annual cash flows during Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar Year 15 Year 2:5 Year 3: 5 d. Should the machine be purchased? -Select- Check ty Work (4 remaining eBook Marble Construction estimates that its WACC is 8% if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that The company believes that it will exhaust its retained earnings at $2,400,000 of capital due to the number of highly profitable projects available to the firm and its limited camines. The company WACC will nse to considering the following seven investment projects: Project Size IRR $ 700,000 13.9% Questions Navigation Menu 1,030,000 13.7 950,000 8.3 1,230,000 9.0 700,000 8.0 710,000 9.3 490,000 Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted? accept accept Project A Project B Project C Project D Project E don't accept accept accept Project F don't accept Y Project G don't accept What is the firm's optimal capital budget? Round your answer to the nearest dollar $ 5810000 Check Sty Work (a remainingStep by Step Solution
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