What is the incremental cash flow in year 2?

Problem 10 Intro You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will cost $22,000 to buy and another $2,000 to install, and will be sold for $1,800 after 3 years. It falls into the 3-year MACRS class, with depreciation rates as follows: Year 1 2 3 Depreciation rate 33% 45% 15% 7% The microscope will require an inventory of spare parts worth $5,000. The equipment will not increase revenue, but will save the company $12,000 in labor costs each year. Your company's marginal tax rate (federal plus state) is 34% and the appropriate cost of capital for this project is 11%. Part 1 IB. Attempt 2/5 for 9.8 pts. What is the initial (year-C) incremental cash flow from the project? Choose the right sign. -28000 Correct At the beginning of the project, EBIT and depreciation are both zero. Initial net equipment cost is the cost of purchase and installation: Equip. costo = 22,000 + 2,000 = 24,000 This is the amount that can be depreciated over time: BV= 24,000 The required spare parts create a change in net working capital: Change in NWC = 5,000 CF, = SOCF - Equip.cost - Change in NWC = EBIT (1-1) + Dep. - Equip.cost - Change in NWC = 0 +0 - 24.000 - 5.000 = -29,000 Attempt 5/5 for 0 pts. Part 2 What is the incremental cash flow in year 1? 6061.6 Incorrect In year 1, net equipment cost and change in net working capital are zero. Depreciation: Di = BVo* di = 24,000 0.33 = 7.920 EBIT = Cost savings - Depreciation = 12,000 - 7.920 = 4,080 CF, = SOCF - Equip. cost - Change in NWC = EBIT (1-1) + Dep. - Equip.cost - Change in NWC = 4,080 (1-0.34) + 7,920 - 0 - 0 = 10,613 B Attempt 1/5 for 10 pts. Part 3 What is the incremental cash flow in year 2? O+decimals Submit B Attempt 1/5 for 10 pts. Part 4 What is the net salvage value at the end of year 3? 0+ decimals Submit IB Attempt 1/5 for 10 pts. Part 5 What is the incremental cash flow in year 3? 0+ decimals Submit IB Attempt 1/5 for 10 pts. Part 6 What is the NPV of this project? 0+ decimals Submit