Question

In: Finance

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $90,000, and it would cost another $22,500 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 $22,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $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 $61,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 35%.

  1. 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 cent.
    $  

  3. 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 cent.
    Year 1: $  
    Year 2: $  
    Year 3: $  

  5. If the WACC is 14%, should the spectrometer be purchased?

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
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 $50,000 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 $50,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $10,000 increase in net operating working capital (spare parts inventory). The project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $280,000, and it would cost another $56,000 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 $126,000. 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 project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $190,000, and it would cost another $28,500 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 $76,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $14,000 increase in net operating working capital (spare parts inventory). The project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $240,000, and it would cost another $36,000 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 $108,000. 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 project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $60,000, and it would cost another $12,000 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 $27,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $13,000 increase in net operating working capital (spare parts inventory). The project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $270,000, and it would cost another $67,500 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 $135,000. 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 project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
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 $62,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $10,000 increase in net operating working capital (spare parts inventory). The project would have...
you must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
you must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $240,000, and it would cost another $36,000 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 $108,000. 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 project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $90,000, and it would cost another $13,500 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 $40,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $14,000 increase in net operating working capital (spare parts inventory). The project would have...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $70,000, and it would cost another $14,000 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 $24,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $9,000 increase in net operating working capital (spare parts inventory). The project would have...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT