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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 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 $ and it would
cost another $ to modify it for special use by your firm. The chromatograph, which falls into the MACRS year class, would be sold after years for $ The MACRS rates for the first years are and Use of the equipment would require an increase in net working capital spare parts inventory of $ The machine would have no effect on revenues, but it is expected to
save the firm $ per year in beforetax operating costs, mainly labor. The firm's marginal federalplusstate tax rate is
a What is the Year net cash flow? If the answer is negative, use parentheses.
b What are the net operating cash flows in Years and Do not round intermediate calculations. Round your answers to the nearest dollar.
Year $
Year $
Year $
c What is the additional nonoperating cash flow in Year Do not round intermediate calculations. Round your answer to the nearest dollar.
d If the project's cost of capital is should the chromatograph be purchased?
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