Thoma Pharmaceutical Company may buy DNA testing equipm

equipment is expected to reduce labor costs of clinical staff by $$20,000$ annually. The equipment has a useful life of five years but falls in the three$-$year property class for cost recovery $($depreciation$)$ purposes. No salvage value is expected at the end. The corporate tax rate for Thoma is $38$ percent $($combined federal and state$),$ and its required rate of return is $15$ percent. $($If profits after taxes on the project are negative in any year, the firm will offset the loss against other firm income for that year.$)$ On the basis of this information, what is the net present value of the project? Is it acceptable?

In Problem $6,$ suppose that $6$ percent inflation in cost savings from labor is expected over the last four years, so that savings in the first year are $$20,000,$ savings in the second year are $$21,200,$ and so forth.

a$.$ If the required rate of return is still $15$ percent, what is the net present value of the project? Is it acceptable?

b$.$ If a working capital requirement of $$10,000$ were required in addition to the cost of the equipment and this additional investment were needed over the life of the project, what would be the effect on net present value? $($All other things are the same as in Problem $7,$ Part $($a$).)$

Please solve problem number $7$ not $6$ but the reason I put both because $7$ is related to $6$ DONT use excel please do step by step