You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $270,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years fo $49,000. The equipment would require a $12,000 increase in net operating working capital (spare parts inventory). The project would have effect on revenues, but it should save the firm $20,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 2 a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash fl Enter your answer as a positive value. Round your answer to the nearest dollar. $ b. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: $ Year 2: $ Year 3: $
You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $270,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years fo $49,000. The equipment would require a $12,000 increase in net operating working capital (spare parts inventory). The project would have effect on revenues, but it should save the firm $20,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 2 a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash fl Enter your answer as a positive value. Round your answer to the nearest dollar. $ b. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: $ Year 2: $ Year 3: $
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...
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