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Please help You must evaluate the purchase of a proposed spectrometer for the R8D department. The purchase price of the spectrometer including modifications is $160,000,
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You must evaluate the purchase of a proposed spectrometer for the R8D department. The purchase price of the spectrometer including modifications is $160,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $38,000. The equipment would require a 512,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $58,000 per year in before-tax labor costs. The firm's marginal federai-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 fiow? Enter your answer as a positive value. Round your answer to the nearest dollar. 5 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 doliar, Year 1 : 5 Year 2:5 Year 3:5 C. If the WACE is 11%, should the spectrometer be purchased Step by Step Solution
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