You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is
Question:
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is 5230,000. and it would cost another S34,500 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 S92,000. The applicable depreciation rates arc 33%, 45%, 15%. and 7%. The equipment would require an S10,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm 572,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
b. What arc the project's annual cash flows in Years I, 2, and 3? Round your answers to the nearest cent.
In Year 1 $ ......
In Year 2 $ ......
In Year 3 $ ......
Fundamentals of Financial Management
ISBN: 978-1337395250
15th edition
Authors: Eugene F. Brigham, Joel F. Houston