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Real Time Inc. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is
Real Time Inc. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $50,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in spare parts inventory of $3,000. Accounts payable will also increase by $2,000 The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. Annual interest expense is $500 per year. The computer is expected to be used for 3 years and then be sold for $35,000. The firm's marginal tax rate is 20 percent, and the project's cost of capital is 12 percent. MACRS Depreciation Rates are: Year 1: Year 2: Year 3: Year 4: 33% 45% 15% 7% 6. Refer to Real Time Inc. What is the net investment required at t = 0?(2 points) 7. Refer to Real Time Inc. What is the operating cash flow in Year3? (2 points) 8. Refer to Real Time Inc. What is the total value of the terminal year non-operating cash flow at the end of Year 3?(2 points)
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