Intro You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will cost $18,000 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 S14,000 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 8%. Part 1 18 Attempt 1/5 for 10 pts. What is the initial (year-O) incremental cash flow from the project? Choose the right sign. -25000 Correct - At the beginning of the project, EBIT and depreciation are both zero. Initial net equipment cost is the cost of purchase and installation: Equip. costo = 18,000 + 2,000 = 20,000 This is the amount that can be depreciated over time: BV = 20,000 The required spare parts create a change in net working capital: Change in NWC = 5,000 CF0 = SOCF - Equip cost - Change in NWC = EBIT (1-t) + Dep. - Equip. cost - Change in NWC = 0 +0 - 20,000 - 5,000 = -25,000 8 Attempt 2/5 for 9.8 pts. Part 2 What is the incremental cash flow in year 1? 0+ decimals Submit 18 Attempt 175 for 10 pts. Part 3 What is the incremental cash flow in year 2? 0+ decimals Submit 8 Attempt 1/5 for 10 pts. Part 4 What is the net salvage value at the end of year 3? 0+ decimals Submit SB Attempt 1/5 for 10 pts. Part 5 What is the incremental cash flow in year 3? 0+ decimals Submit FB Attempt 1/5 for 10 pts. Part 6 What is the NPV of this project? 0+ decimals Submit