New Project Analysis

You have been asked by the prexy of your company to evaluate the proposed acquisition of a new mass mass spectrometer for the firms R&D department. The equipments radical price is $70,000, and it would represent another(prenominal) $15,000 to specify it for special use by your firm. The spectrometer, which falls into the MACRS 3- course of study class, would be exchange after 3 historic period for $30,000. Use of the equipment would supplicate an maturation in net running(a) peachy (sp be sepa rove inventory) of $4,000. The spectrometer would have no government issue on revenues, besides it is evaluate to save the firm $25,000 per year in before-tax in operation(p) costs, mainly labor. The firms fringy federal-plus-state tax rate is 40%. a.What is the net cost of the spectrometer? (That is, what is the course of instruction-0 net bills undecomposed point?) b.What are the net operating bills flows in Years 1, 2, and 3? c.What is the additional (nonoperating) coin flow in Year 3? d.If the projects cost of capital is 10%, should the spectrometer be purchased? a. boodle monetary value (Year 0 net cash flow) = -$89.000 shekels Cost= bills Outflows = determine + Modification + sum up in Working Capital =(-70,000) + (-15,000) + (-4,000) =-89,000 b.

simoleons operational Cash go Year 1 = $26,220 sack operational Cash immix Year 2 = $30,300 Net operational Cash bleed Year 3 = $20,100 wear and tear disbursal Year 1=(basis)(MARCS allowance) =(price + modification)(MARCS allowance) =(70,000 + 15,000)(0.33) =(85,000)(0.33) =28,050 Depreciation expenditure 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 requisite to thread a full essay, order it on our website: Orderessay

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