Assignment: Chapter 12 Homework Time Remaining: 0:58:20 Questions Problem 12.08 (New Project Analysis) 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 0 eBook Assignment Score: 78.57% Save Submit Assignment for Grading Question 4 of 14 ► Check My Work You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $140,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $32,000. The equipment would require an $8,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $43,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow? 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: $ c. If the WACC is 11%, should the spectrometer be purchased? -Select- ✓ Icon Key Check My Work
Assignment: Chapter 12 Homework Time Remaining: 0:58:20 Questions Problem 12.08 (New Project Analysis) 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 0 eBook Assignment Score: 78.57% Save Submit Assignment for Grading Question 4 of 14 ► Check My Work You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $140,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $32,000. The equipment would require an $8,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $43,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow? 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: $ c. If the WACC is 11%, should the spectrometer be purchased? -Select- ✓ Icon Key Check My Work
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assignment: Chapter 12 Homework
Time Remaining: 0:58:20
Questions Problem 12.08 (New Project Analysis)
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Assignment Score: 78.57%
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Question 4 of 14 ►
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You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is
$140,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $32,000. The equipment would
require an $8,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm
$43,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%.
a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow? 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: $
c. If the WACC is 11%, should the spectrometer be purchased?
-Select- ✓
Icon Key
Check My Work
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