Question
In: Finance
5. Problem 12.08 (New Project Analysis) You must evaluate the purchase of a proposed spectrometer for the...
5. Problem 12.08 (New Project Analysis)
You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $140,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $48,000. 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 $62,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%.
- What is the initial investment outlay for the spectrometer,
that is, what is the Year 0 project cash flow? Enter your answer as
a positive value. Round your answer to the nearest dollar.
$ - What are the project's annual cash flows in Years 1, 2, and 3?
Do not round intermediate calculations. Round your answers to the
nearest dollar.
Year 1: $
Year 2: $
Year 3: $ - If the WACC is 14%, should the spectrometer be purchased?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
7. Problem 12.08 (New Project Analysis) eBook You must evaluate the purchase of a proposed spectrometer for...
7. Problem 12.08 (New Project Analysis)
eBook
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The purchase price of the spectrometer
including modifications is $270,000, and the equipment will be
fully depreciated at the time of purchase. The equipment would be
sold after 3 years for $80,000. The equipment would require a
$9,000 increase in net operating working capital (spare parts
inventory). The project would have no effect on revenues, but it
should save the firm...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS You must evaluate the purchase of a
proposed spectrometer for the R&D department. The base price is
$140,000, and it would cost another $35,000 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 $35,000. The
applicable depreciation rates are 33%, 45%, 15%, and 7%. The
equipment would require a $9,000 increase in net operating working
capital (spare parts inventory). The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $160,000, and it would
cost another $40,000 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 $72,000. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require a $7,000
increase in net operating working capital (spare parts inventory).
The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $140,000, and it would
cost another $35,000 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 $42,000. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require a $8,000
increase in net operating working capital (spare parts inventory).
The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $250,000, and it would
cost another $62,500 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 $15,000
increase in net operating working capital (spare parts inventory).
The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $300,000, and it would
cost another $60,000 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 $105,000. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require a $5,000
increase in net operating working capital (spare parts inventory).
The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
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 $70,000. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require a $11,000
increase in net operating working capital (spare parts inventory).
The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $170,000, and it would
cost another $42,500 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 $59,500. 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...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $250,000, and it would
cost another $37,500 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 $125,000. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require a $9,000
increase in net operating working capital (spare parts inventory).
The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS
You must evaluate the purchase of a proposed spectrometer for
the R&D department. The base price is $120,000, and it would
cost another $18,000 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 $36,000. The applicable depreciation rates
are 33%, 45%, 15%, and 7%. The equipment would require a $6,000
increase in net operating working capital (spare parts inventory).
The...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Ludwig van Beethoven is considered a transitional figure in music history and he is the first...
- Here are forecasts for next year for two stocks: Stock A Stock B Return on equity...
- Why are tangible assets depreciated? Briefly described two or three depreciation methods and how they work.
- I want flowchart process for this code c++ _____________________ #include<bits/stdc++.h> using namespace std; int main() {...
- How would you advise your parents or grandparents regarding their asset allocation?
- MANAGING CASH FLOW do you think most entrepreneurs are as thorough with their financial management? Why...
- G and P Manufacturing would like to minimize the labor cost of producing dishwasher motors for...
ADVERTISEMENT