questuons

1. what amount should be used as the initial cash flow for this project and why??

2. What is the after-tax salvage value for the spectrometer?

3. What is the MPV of the project? Should the firm accept or reject this project?

Ogren Corporation is considering purchasing a new spectrometer for the firm's R\&D department. The purchase price is $70,000 and it would cost another $15,000 to install it. The spectrometer which falls into the MACRS 3-year property class (Year 133.33%, Year 244.44%, Year 314.82%, and Year 47.41% ) is projected to be sold after three years for $30,000. Use of this equipment would result in an increased net working capital of $4,000 over the life of the machine. The spectrometer would have no effect on revenues, but it is expected to save the firm $35,000 per year in before-tax operating costs, mainly labor. The firm's tax rate is 40%, and the required rate of return on the project is 11%