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please answer both of these. i have posted them 3 times and chegg has gotten them wrong all times You must evaluate the purchase of
please answer both of these. i have posted them 3 times and chegg has gotten them wrong all times
You must evaluate the purchase of a proposed spectrometer for the R\&D department. The purchase price of the spectrometer including modifications is $260,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $36,000. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $20,000 per year in beforetax labor costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 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 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: $ Year 2: $ Year 3: \$ c. If the WACC is 12%, should the spectrometer be purchased? Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $375,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. Under straightline depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The company's WACC is 8%, and its tax rate is 20%. a. What would the depreciation expense be each year under each method? Enter your answers as positive values. Round your answers to the nearest dollar. b. Which depreciation method would produce the higher NPV? How much higher would the NPV be under the preferred method? Do not round intermediate calculations. Round your answer to the nearest dollar Step by Step Solution
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