Question
Intro You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will cost $24,000 to buy and another $2,000 to install,
Intro You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will cost $24,000 to buy and another $2,000 to install, and will be sold for $1,800 after 3 years. It falls into the 3-year MACRS class, with depreciation rates as follows: Year 1 2 3 4 Depreciation rate 33% 45% 15% 7% The microscope will require an inventory of spare parts worth $5,000. The equipment will not increase revenue, but will save the company $12,000 in labor costs each year. Your company's marginal tax rate (federal plus state) is 34% and the appropriate cost of capital for this project is 13%
Attempt 1/5 for 10 pts. Part 1 What is the initial (year-0) free cash flow from the project? Choose the right sign.
Attempt 1/5 for 10 pts. Part 2 What is the free cash flow in year 1?
Attempt 1/5 for 10 pts. Part 3 What is the free cash flow in year 2?
Attempt 1/5 for 10 pts.Part 4 What is the after-tax salvage value at the end of year 3?
Attempt 1/5 for 10 pts. Part 5 What is the free cash flow in year 3?
Attempt 1/5 for 10 pts. Part 6 What is the NPV of this project?
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