Question: Can someone explain how to answer this question: New-Project Analysis The president of your company, Morchuck Enterprises, has asked you to evaluate the proposed acquisition

Can someone explain how to answer this question:

Can someone explain how to answer this question:
New-Project Analysis The president of your company, Morchuck Enterprises, has asked you to evaluate the proposed acquisition ofa new chromatograph for the rm's R&D department. The equipment's basic price is $73,000, and it would cost another $15,500 to modify it for special use by your rm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $27,100. The MACRS rates for the rst three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,450. The machine would have no effect on revenues, but it is expected to save the rm $26,080 per year in before-tax operating costs, mainly labor. The rm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash ow? $ b. What are the net operating cash ows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.) Year 1: $ Year 2: $ Year 3: 3; c. What is the additional (nonoperating) cash ow in Year 3? $ d. If the project's cost of capital is 14%, what is the NPV of the project? $ Should the chromatograph be purchased

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