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Please show calculations through excel The Campbell Company is considering purchasing a spectrometer for the R&D department. The base price is $140,000, and it would

Please show calculations through excel

The Campbell Company is considering purchasing a spectrometer for the R&D department. The base price is $140,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment falls into the MARCRS 3-year class and would be sold after 3 years for $60,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $8,000 increase in net operating working capital (spare parts inventory) at t = 0. The equipment would have no effect on revenues, but it should save the firm $50,000 per year in before-tax labor cost. The firms marginal federal-plus-state tax rate is 35%.

a.What is the Year-0 (t = 0) net cash flow (initial investment outlay)?

b.What are the net operating cash flows in Years 1, 2 and 3?

c.What is the additional Year-3 cash flow (i.e., the after-tax salvage value of the equipment and the return of working capital)?

d.If the projects cost of capital is 9%, should the spectrometer be purchased? Explain.

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