Question: 6. Problem 12.08 (New Project Analysis) You must evaluate the purchase of a proposed spectrometer for the RBD department. The purchase price of the spectrometer
6. Problem 12.08 (New Project Analysis) You must evaluate the purchase of a proposed spectrometer for the RBD department. The purchase price of the spectrometer including modifications is $100,000, and the equipment win be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $40,000, The equipment would require an $11,000 increase in nec operating working copital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $56,000 per year in before-tax laber costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow? Enter your answer as a Dositive value. Round your answer to the nearest dollar. 5 t. What are the orolect's annual cash fows in Years 1, 2, and 3 ? Do not round intermediate calculations, Round your answers to the nearest delar. Year 1:5 Year 2:5 Year 3:5 C. If tha warce is 10%, should the spectrometer be purchased
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
