SOLVE THIS MANUALLY, WITH FORMULAS AND CALCULATOR NOT WITH 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 $12\%.$

What is the year $0$ Net cash Flow?

A$.$ $$71,000$

B$.-$$$50,000$

C$.-65,000$

D$.65,000$

E$.-71,000$

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

A$.$ $$24,000$

B$.$ $$18,000$

C$.$ $$20,761$

D$.$ $$20,678$

Should the chromatograph be purchased?

A$.NO,NPV=-8,198$

B$.$ YES, NPV $=9433$

C$.NO,NPV=-8,198$

D$.$ YES,$NPV=15,309$

E$.$ YES, NPV $=-98,537$