12-6 New project analysis You must evaluate a proposed spectrometer for the R&D department. The base price is $140,000, and it would cost another $30,000 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 $60,000. The applicable depreciation rates are 33, 45, 15, and 7 percent as discussed in Appendix 12A. The equipment would require an $8,000 increase in working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $50,000 per year before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40 percent. a. What is the net cost of the spectrometer, that is, what is the Year 0 project cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? What is the terminal cash flow? d. If the WACC is 12 percent, should the spectrometer be purchased?