New Project Analysis

You have been asked by the president of your company to evaluate the proposed learnedness of a new spectrometer for the firms R&D department. The equipments basic price is $70,000, and it would cost another(prenominal) $15,000 to neuter it for special use by your firm. The spectrometer, which falls into the MACRS 3-year class, would be interchange after 3 years for $30,000. Use of the equipment would supplicate an ontogeny in net working peachy (spargon sepa rove inventory) of $4,000. The spectrometer would have no effect on revenues, besides it is expect to save the firm $25,000 per year in before-tax in operation(p) costs, in the main labor. The firms marginal federal-plus-state tax rate is 40%. a.What is the net cost of the spectrometer? (That is, what is the class-0 net bills flow?) b.What are the net operating gold flows in classs 1, 2, and 3? c.What is the additional (nonoperating) cash flow in Year 3? d.If the projects cost of capital is 10%, should the spect rometer be purchased? a. Net Cost (Year 0 net cash flow) = -$89.000 Net Cost= notes Outflows = determine + Modification + augment in Working Capital =(-70,000) + (-15,000) + (-4,000) =-89,000 b.

Net operational immediate payment Flow Year 1 = $26,220 Net operational property Flow Year 2 = $30,300 Net operational Cash Flow Year 3 = $20,100 disparagement disbursal Year 1=(basis)(MARCS allowance) =(price + modification)(MARCS allowance) =(70,000 + 15,000)(0.33) =(85,000)(0.33) =28,050 Depreciation expense Year 2=(basis)(MARCS allowance) =(price + modification)(MARCS allowance) =(70,000 + 15,000)(0.45) =(85,000)(0.45) =38,250 Depreciation expense Year 3=(basis)(MARCS allowance) =(! price + modification)(MARCS allowance) =(70,000 + 15,000)(0.15) =(85,000)(0.15) =12,750 Net Op CF Year 1=[after-tax cost savings] + [depreciation shield] =[annual savings(1 tax rate)] + [depreciation expense(tax rate)] =(25,000)(1 ...If you want to thread a full essay, order it on our website: OrderEssay.net

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