Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I have no idea what I am doing wrong, if you could show me your excel formulas that would be very helpful! The president of

image text in transcribedI have no idea what I am doing wrong, if you could show me your excel formulas that would be very helpful!

The president of your company, MorChuck Enterprises, 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 $73,000, and it would cost another $18,000 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 $31,000. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,450. The machine would have no effect on revenues, but it is expected to save the firm $26,080 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. 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 dollar. a. What is the Year-O net cash flow? $ -94450 b. What are the net operating cash flows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.) $ Year 1: 27430 $ Year 2: 30056 $ Year 3: 23057 c. What is the additional (nonoperating) cash flow in Year 3? $ 30753 d. If the project's cost of capital is 13%, what is the NPV of the project? $ -11736 Should the chromatograph be purchased? No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Payroll Accounting 2016

Authors: Bernard J. Bieg, Judith Toland

26th edition

978-1305665910, 1305665910, 1337072648, 978-1337072649

Students also viewed these Finance questions