Instructions

a$.$ Specify the cash flow in each year. for example, CF$0=$$$200,$ CPT NPV$=$ $$18$

b$.$ If the cash flow is not given, show the estimation details.

c$.$ SHOW THE PROCESS FOR SOLVE IT WITH A CALCULATOR NOT EXCEL.

The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment$$s basic price is $$50,000$ and it would cost another $$15,000$ to modify it for special use by your firm. The chromatograph, which falls into the MACRS $3-$year class would be sold after $3$ years for $$25,000.$ The MACRS rates are as follows: $0\mathrm{.}3333,0\mathrm{.}4445,0\mathrm{.}1481$ and $0\mathrm{.}0741.$ Use of the equipment would require an increase in net working capital $($spare parts inventory$)$ of $$6,000.$ The machine would have no effect on revenues. But is expected to save the firm $$30,000$ per year in before$-$tax operating costs, mainly labor. The firm$$s marginal tax is $21\%.$ If the cost of capital is $12\%.$

$1.$ What is the year $0$ Net cash Flow?

$2.$ What is the after$-$tax salvage value at the end of year $3?$

$3.$ Should the chromatograph be purchased?