Fi504 Fi515 Week5 Project

Week 5 project Problem 11- 7 New-Project analytic thinking You take a leak been asked by the president of your association to evaluate the proposed acquisition of a new spectrometer for the self-coloreds R& axerophthol;D department. The equipments introductory price is $70,000, and it would make up other $15,000 to modify it for special utilisation by your stanch. 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 gain 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 truehearted $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 cyberspace cost of the spectrometer? (That is, what is the course of instruction-0 net capital scarper?) b. What are the net operating cash precipi tates in geezerhood 1, 2, and 3? (26220,30300,20100) c. What is the additional (nonoperating) cash flow in category 3? 24380 d. If the projects cost of capital is 10%, should the spectrometer be purchased?

NPV=-6704 no purchase Known cultivation: spectrometer Base Price: $70,000 Modifications: $15000 Salvage after 3 years: $30000 Net work big(p) increase: $4000 cost savings before Taxes: $25000/year Marginal Fed and articulate tax rate: 40% a. What is the net cost of the spectrometer? Spectrometer Base Price: | - $70,000| Modifications: | - $15,000| Net work Capital Increase: | - $4,00 0| Total Net cash flow:| -$89,000| b. W! hat 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 require to get a full essay, order it on our website: BestEssayCheap.com

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