Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firms R&D department.

The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firms R&D department. The equipment's basic price is $100,000, and it would cost another $15,000 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 $25,000. The MACRS rates for the first three 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 $5,000. The machine would have no effect on revenues, but it is expected to save the firm $30,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 30%.

What is the additional (nonoperating) cash flow in Year 3? Round your answer to the nearest dollar. $

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

Principles Of Finance With Excel

Authors: Simon Benninga, Tal Mofkadi

3rd Edition

0190296380, 9780190296384

More Books

Students also viewed these Finance questions

Question

Demonstrate through language that you are grateful to be informed.

Answered: 1 week ago

Question

Always mention the specifi c problem the customer faced.

Answered: 1 week ago