Can anyone figure this out, I keep getting the wrong answers?The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $64,000, and it would cost another $18,000 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 $28,400. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,000. The machine would have no effect on revenues, but it is expected to save the firm $24,760 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. What is the Year-0 net cash flow?$ What are the net operating cash flows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.)Year 1:$ Year 2:$ Year 3:$ What is the additional (nonoperating) cash flow in Year 3?$ If the project's cost of capital is 11%, what is the NPV of the project? New-Project AnalysisThe president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $64,000, and it would cost another$18,000 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 $28,400. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignorethe half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,000. The machine would have no effect on revenues, but it is expected to savethe firm $24,760 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediatecalculations. Round your answers to the nearest dollar.a. What is the Year-0 net cash flow?$-85,000b. What are the net operating cash flows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.)Year 1: $Year 2:$Year 3: $21,606c. What is the additional (nonoperating) cash flow in Year 3?$25819d. If the project's cost of capital is 11%, what is the NPV of the project?ૐ

Formula for Net Operating Cash Flow:For each year:Net Operating Cash Flow = (Savings − Taxes) +…

New-Project Analysis The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $64,000, and it would cost another $18,000 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 $28,400. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,000. The machine would have no effect on revenues, but it is expected to save the firm $24,760 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? $ -85,000 b. What are the net operating cash flows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.) Year 1: $ Year 2: $ Year 3: $ 21,606 c. What is the additional (nonoperating) cash flow in Year 3? $ 25819 d. If the project's cost of capital is 11%, what is the NPV of the project? ૐ

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 7P

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Can anyone figure this out, I keep getting the wrong answers?

The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $64,000, and it would cost another $18,000 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 $28,400. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,000. The machine would have no effect on revenues, but it is expected to save the firm $24,760 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.

What is the Year-0 net cash flow?

$
What are the net operating cash flows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.)

Year 1: $

Year 2: $

Year 3: $
What is the additional (nonoperating) cash flow in Year 3?

$
If the project's cost of capital is 11%, what is the NPV of the project?

New-Project Analysis
The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $64,000, and it would cost another
$18,000 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 $28,400. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore
the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $3,000. The machine would have no effect on revenues, but it is expected to save
the firm $24,760 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate
calculations. Round your answers to the nearest dollar.
a. What is the Year-0 net cash flow?
$
-85,000
b. What are the net operating cash flows in Years 1, 2, and 3? (Note: Do not include recovery of NWC or salvage value in Year 3's calculation here.)
Year 1: $
Year 2:
$
Year 3: $
21,606
c. What is the additional (nonoperating) cash flow in Year 3?
$
25819
d. If the project's cost of capital is 11%, what is the NPV of the project?
ૐ

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