You must evaluate the purchase of a spectrometer for the R&D department. The base price is $11,000, and it would cost another $100 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $1,650. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $800 increase in net operating working capital. The project would have no effect on revenues, but it should save the firm $6,000 per year in before-tax labor costs. The firms marginal federal-plus-state tax rate is 40%

What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow?

What is the project's Free Cash Flow in Year 1?

What is the project's Free Cash Flow in Year 2?

What is the project's Free Cash Flow in Year 3?

If the WACC is 10%, what is the project's NPV?