Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's RaD department. The
The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's RaD department. The equipment's basic price is $78,000, and it would cost another $16,500 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 $29,700. The MACRS rates for the first three years are 0.3333,0.4445 and 0.1481 . Use of the equipenent wauld require an increase in net working capital (spare parts inventory) of $4,480. The machine would have no effect on tevenues, bot it is expected to save the firm $26,320 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is, 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? b. What are the project recurring cash flows in Years 1, 2, and 3 ? c. What is the additional (nonoperating) cash flow in Year 3 ? 5 d. If the project's cost of capital is 13%, what is the NPV of the project? $ Should the chromatograph be purchased
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started