What is the net cost of the spectrometer

Reference no: EM13302965

You have been asked by the president of your company to evaluate the proposed acquisition of a new speedometer for the firm's R&D department. The equipment's basic price is $70,000, and it would cost another $15,000 to modify it for special use for your firm. The spectrometer, which has a MACRS 3-year recovery period, would be sold after 3 years for $30,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000 (which will be recaptured at the end of the project). The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%.

(a) What is the net cost of the spectrometer?(that is, what is year0 net cash flow?)
(b) What are the net operating cash flows in year 1,2, and 3?
(c) What is the terminal cash flow of the project?
(d) If the project cost of capital is 10%, would this project be accepted?

Reference no: EM13302965

Questions Cloud

Find velocity of each block knowing the relative velocity : The three blocks shown move move with constant velocities. Find the velocity of each block, knowing that the relative velocity of A with respect to C is 300 mm/s upward and that the relative velocity of B with respect to A is 200 mm/s downward.

What is the decibel intensity at this distance : A loudspeaker receives 8.0 W of power from an audio amplifier, and turns 3 % of that power into sound waves. What is the decibel intensity at this distance

What is the company cost of capital : What is the company cost of capital? What is the after-tax WACC, assuming that the company pays tax at a 35% rate?

Find the coefficient of performance of the air conditioner : A Carnot air conditioner maintains the temperature in a house at 294 K on a day when the temperature outside is 308 K

What is the net cost of the spectrometer : The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%.

If per capita personal income increases : If per capita personal income increases by 10%, and a firm's demand increases by 15%, you can conclude that the firm sells a product with a (n)_____. A company raises the price of toilet tissue by 10%, and the quantity sold by its competitor rises by..

What is the marginal cost in a production situation : What is the marginal cost in a production situation? Where does the minimum point occur on the average cost curve?

Determine smallest values of c and k for static deflection : the turbopump unit in the engine nominally operates at 7000 rpm, and a result of design issue, the actual thrust provided by the engine oscillates harmonically with an amplitude of 10 KN at the same rotational frequency as the turbopump unit.

What is the cost of each alternative : Penn is trying to decide whether it should offer 40 percent of its stock or $95 million in cash to Teller's shareholders.

User Account

All Pages