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Category > Business & Finance Posted 07 Jun 2017 My Price 7.00

The president of the company you work for has asked

The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firmAc€?cs R&D department. The equipmentAc€?cs basic price is $85,000, and it would cost another $20,000 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 $40,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $5,000. The machine would have no effect on revenues, but it is expected to save the firm $38,000 per year in before-tax operating costs, mainly labor. The firmAc€?cs marginal federal-plus-state tax rate is 40% and its cost of capital is 11%.

What is the Year-0 net cash flow?

   
($105,000)
   
($85,000)
   
($110,000)
   
($81,000)
   

($89,000)

What is the after-tax salvage value cash flow of the new machine at the end of project's life?

   
$40,000
   
$20,519
   
$27,112
   
$30,000
   
$19,332

What is the year 1 operating cash flow?

   
$7,447
   
$1,802
   
$36,799
   
$34,997
   

$26,332

What is the last year's total cash flow without including the operating cash flow?

   
$61,132
   
$44,555
   
$29,020
   
$7,447
   
$32,112

What is the NPV of this project?

   
$1,359
   
$1,509
   
$29,400
   
$12,000
   
($6,700)

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Homework Helper
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Status NEW Posted 07 Jun 2017 06:06 AM My Price 7.00

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