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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 $54,000 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 $81,000. 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 no effect on revenues, but it should save the firm $65,000 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?
    -Select-YesNoItem 5
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Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

C W ENG 05:33 31-07-2020 99+ 29 Х UW375 fx UW UX UY UZ VA VB VC VD VE VE 359 360 361 0 1 2 3 SPECTROMETER YEAR COST OF ASSET

C w ENG 05:33 31-07-2020 99+ 29 Х VO383 fc . VE VH VI VJ VK VL VM VN vo VP 360 VG NOTE COST OF ASSET DEPRECIATION YEAR 361 36

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