Question

In: Finance

This is all one question, thank you so much in advance! You must evaluate the purchase...

This is all one question, thank you so much in advance!

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $200,000, and it would cost another $30,000 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 $100,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $73,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.

  1. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign.
    $
  2. What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.

    In Year 1 $

    In Year 2 $

    In Year 3 $

  3. If the WACC is 13%, should the spectrometer be purchased?

Solutions

Expert Solution

Please rate Thumbs up


Related Solutions

This is all one question, thank you so much in advance! You must evaluate a proposal...
This is all one question, thank you so much in advance! You must evaluate a proposal to buy a new milling machine. The base price is $102,000, and shipping and installation costs would add another $10,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $61,200. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $7,500 increase in net operating working capital (increased inventory less increased...
This is all one question, thank you very much in advance! You must evaluate a proposal...
This is all one question, thank you very much in advance! You must evaluate a proposal to buy a new milling machine. The base price is $189,000, and shipping and installation costs would add another $16,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $103,950. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $7,000 increase in net operating working capital (increased inventory less increased...
This is all one question, thank you so much in advance. The Bigbee Bottling Company is...
This is all one question, thank you so much in advance. The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $575,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $265,000....
CASH CONVERSION CYCLE - HELLO, THIS IS ALL ONE QUESTION, THANK YOU SO MUCH IN ADVANCE!...
CASH CONVERSION CYCLE - HELLO, THIS IS ALL ONE QUESTION, THANK YOU SO MUCH IN ADVANCE! Parramore Corp has $20 million of sales, $3 million of inventories, $4 million of receivables, and $2 million of payables. Its cost of goods sold is 85% of sales, and it finances working capital with bank loans at an 6% rate. Assume 365 days in year for your calculations. Do not round intermediate steps. What is Parramore's cash conversion cycle (CCC)? Do not round...
FINANCIAL LEVERAGE EFFECTS - Hello! This is all one question, thank you very much in advance!...
FINANCIAL LEVERAGE EFFECTS - Hello! This is all one question, thank you very much in advance! Will thumbs up for answer! :D The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $13 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three...
Hey! I'm having trouble answering this for my assignment. Thank you so much in advance. 1)...
Hey! I'm having trouble answering this for my assignment. Thank you so much in advance. 1) Which type of vessels, arteries or veins, has more muscle fibers? What is the functional significance of this? 2a) In general, we have no conscious control over smooth muscle or cardiac muscle function, whereas we can consciously control to some extent all skeletal muscles. Can you consciously control your breathing? What does this tell you about the muscle type of the diaphragm? 2b) What...
HI please answer all parts of my question. Thank you so much! I will rate you!...
HI please answer all parts of my question. Thank you so much! I will rate you! Why do we call cardiac muscle to be a syncytium of many individual muscle cells? What is the name of membranes that connect longitudinally adjacent muscle cells? As you know the mechanism of organophosphates involves irreversible inhibitors of AChE. Organophosphates have been used in several murders (VX used to kill the half-brother of North Korean dictator Kim Jong Un; Sarin gas used to kill...
Thank you in advance, i'm not so good with this subject so could you include the...
Thank you in advance, i'm not so good with this subject so could you include the steps you did please 1. The gross weekly sales at a certain super market are a Gaussian random with mean $2200 and standard deviation $230. Assume that the sales from week to week are independent. (a) Find the probability that the gross sales over the next two weeks exceed $5000. (b) Find the probability that the gross weekly sales exceed $2000 in at least...
please answer all parts of question, thank you so much 12. Identify the correct statements. Fix...
please answer all parts of question, thank you so much 12. Identify the correct statements. Fix the incorrect ones. a. A sampling distribution describes the distribution of data values. b. A sampling distribution shows the behavior of a sampling process over many samples. c. The probability distribution of a parameter is called a sampling distribution. d. Sampling distributions describe the values of a data summary for many samples. 14. 14. Why is random sampling important? 18. A large university wants...
CURRENT ASSETS INVESTMENT POLICY - HELLO, THIS IS ALL ONE QUESTION, THANK YOU VERY MUCH IN...
CURRENT ASSETS INVESTMENT POLICY - HELLO, THIS IS ALL ONE QUESTION, THANK YOU VERY MUCH IN ADVANCE FOR ANY HELP YOU CAN GIVE! Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 50% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT