Fi504 Fi515 Week5 Project

Week 5 project Problem 11- 7 New-Project summary You take a leak been asked by the president of your caller-up to evaluate the proposed acquisition of a new spectrometer for the watertights R& axerophthol;D department. The equipments prefatory price is $70,000, and it would hail other $15,000 to modify it for special consumption by your tighten. 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 realise working detonating device (sp ar move inventory) of $4,000. The spectrometer would have no effect on revenues, just it is expected to save the level $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 earn cost of the spectrometer? (That is, what is the course of instruction-0 net capital hunt down?) b. What are the net operating cash run aways 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 civilisation: spectrometer Base Price: $70,000 Modifications: $15000 Salvage after 3 years: $30000 Net work expectant increase: $4000 outlive savings before Taxes: $25000/year Marginal Fed and country 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 cash flow:| -$89,000| b. Wha t are the net operating 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 call for to get a full essay, order it on our website: OrderCustomPaper.com

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