New Project Analysis The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's RAD department. The equipment's basic price is $74,000, and it would cost another $16,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year dass, would be sold after 3 years for $32,400. The MACRS rates for the first 3 years are 0,3333, 0.4445 and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,500. The machine would have no effect on revenues, but it is expected to save the firm $28,660 per year in before tax operating costs, mainly labor. The firm's marginal federal plus state tax rate is 40%. Cash outflows and negative NPV value, If any, should be indicated by a minussion. Do not round intermediate calculations. Round your answers to the nearest dollar a. What is the Year net cash flow? $ b. What are the net operating cash flows in Years 1, 2, and 3? Do not include recovery of NWC or salvage value in Year 3's calculation here. Year 1: $ Year 2: $ Year 3: $ c. What is the additional cash flow In Year 3 from NWC and salvage? $ d. If the project's cost of capital is 13%, what is the NPV of the project? $ Should the chromatograph be purchased? Select New Project Analysis The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's RAD department. The equipment's basic price is $74,000, and it would cost another $16,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year dass, would be sold after 3 years for $32,400. The MACRS rates for the first 3 years are 0,3333, 0.4445 and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,500. The machine would have no effect on revenues, but it is expected to save the firm $28,660 per year in before tax operating costs, mainly labor. The firm's marginal federal plus state tax rate is 40%. Cash outflows and negative NPV value, If any, should be indicated by a minussion. Do not round intermediate calculations. Round your answers to the nearest dollar a. What is the Year net cash flow? $ b. What are the net operating cash flows in Years 1, 2, and 3? Do not include recovery of NWC or salvage value in Year 3's calculation here. Year 1: $ Year 2: $ Year 3: $ c. What is the additional cash flow In Year 3 from NWC and salvage? $ d. If the project's cost of capital is 13%, what is the NPV of the project? $ Should the chromatograph be purchased? Select
