Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show all work New-Project Analysis The president of the company you work for has asked you to evaluate the proposed acquisition of a new

Please show all work
image text in transcribed
image text in transcribed
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 R\&D department. The equipment's basic price is $72,000, and it would cost another $17,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3 -year class, would be sold after 3 years for $26,200. 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 $3,400. The machine would have no effect on revenues, but it is expected to save the firm $22,120 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%. Cash outtlows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? s b. What are the net operating cash flows in Years 1, 2, and 3? Do not include recovery of Nw/C or salvage value in Year 3's calculation here. Year 1: \$. Year 2: s. Year 3: 5 c. What is the additional cash flow in Year 3 from NWC and salvage? $ d. If the project's cost of capital is 14%, what is the NPV of the project? . $ Should the chromatograph be purchased

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Financial Crisis Implications For Research And Teaching

Authors: Ted Azarmi, Wolfgang Amann

1st Edition

3319205870, 978-3319205878

More Books

Students also viewed these Finance questions