Problem 12.08( New Project Analysis)

You must evaluate the purchase of a proposed spectrometer for the R\&D department, The purchase price of the spectrometer including modifications $280,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $51,000, The equipmes vould require a $7,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should ave the firm $54,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outiay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow Enter vour answar as a positive value. Round your answer to the nearest dollar. 41 b. What are the project's annual cash fows in Years 1,2 , and 3 ? Do not round intemediate calculations. Round your answers to the nearest dollar. Year 1:5 Year 2:$ Year 3:$ c. If the WACr is 13%, should the spectrometer be purchased