What is initial investment outlay for the spectrometer

Reference no: EM131350962

You must evaluate a proposed spectrometer for the R&D department. The base price is $180,000, and it would cost another $27,000 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 $90,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $7,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $21,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. 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. $ 214000 What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent. in Year 1 $ 39924 in Year 2 $ 49860 in Year 3 $=? If the WACC is 12%, should the spectrometer be purchased?

Reference no: EM131350962

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