Please show all work. You have been asked by the president of your company...
50.1K
Verified Solution
Link Copied!
Question
Finance
Please show all work.
You have been asked by the president of your company to evaluate the proposed acquisition of a new spectrometer for the firm's R&D department. The equipment's basic price is $70,000 and it would cost another $15,000 to modify it for special use by your firm. The spectrometer, which has a MACRS 3-year recovery period, would be sold after 3 years for $30,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000 The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. If the project's cost of capital is 10 percent, should the firm purchase the spectrometer? Answer based on (i) the NPV, (ii) the IRR, (iii) the profitability index, and (iv) the payback rule. Complete this assignment in a spreadsheet or by hand and submit your work to this assignment page as a file upload. Be sure to very clearly label/identify each input or item and what you are doing in order to have a chance to receive partial credit for incorrect answers
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
