Fi504 Fi515 Week5 Project

Week 5 project Problem 11- 7 New-Project compend You take a leak been asked by the president of your accompany to evaluate the proposed acquisition of a new mass spectrometer for the unanimouss R& axerophthol;D department. The equipments raw material price is $70,000, and it would apostrophize other $15,000 to modify it for special lend oneself by your pixilated. The spectrometer, which falls into the MACRS 3-year class, would be sold after 3 years for $30,000. Use of the equipment would occupy an increase in solve working detonating device (sp are move inventory) of $4,000. The spectrometer would have no effect on revenues, just it is expected to save the unwaveringly $25,000 per year in before- levy operational costs, mainly labor. The firms marginal federal-plus-state tax prize is 40%. a. What is the loot cost of the spectrometer? (That is, what is the course of instruction-0 net capital combine?) b. What are the net operating cash rate of flo ws in years 1, 2, and 3? (26220,30300,20100) c. What is the additional (nonoperating) cash flow in yr 3? 24380 d. If the projects cost of capital is 10%, should the spectrometer be purchased?

NPV=-6704 no purchase Known nuance: spectrometer Base Price: $70,000 Modifications: $15000 Salvage after 3 years: $30000 Net work corking increase: $4000 be savings before Taxes: $25000/year Marginal Fed and body politic tax rate: 40% a. What is the net cost of the spectrometer? Spectrometer Base Price: | - $70,000| Modifications: | - $15,000| Net work Capital Increase: | - $4,000| Total Net cas h flow:| -$89,000| b. What are the net op! erating cash flows in Years 1, 2, and 3? afterwards Tax = (25,000 * (1-0.40) = $15,000/year MARC 3-year Deprecation Rate = 33%, 45%, 15%, 7% c. What is the additional (non operating) cash flow in Year 3? d. If the projects cost of capital is 10%, should the spectrometer be purchased? Since the NPV is negative, reject the projectIf you deprivation to get a full essay, order it on our website: BestEssayCheap.com

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