Intro You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will...

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Intro You're evaluating a new electron microscope for the QA(quality assurance) unit. The microscope will cost $24,000 to buyand another $2,000 to install, and will be sold for $1,800 after 3years. It falls into the 3-year MACRS class, with depreciationrates as follows: Year 1 2 3 4 Depreciation rate 33% 45% 15% 7% Themicroscope will require an inventory of spare parts worth $5,000.The equipment will not increase revenue, but will save the company$12,000 in labor costs each year. Your company's marginal tax rate(federal plus state) is 34% and the appropriate cost of capital forthis project is 13%
Attempt 1/5 for 10 pts. Part 1 What is the initial (year-0) freecash flow from the project? Choose the right sign.
Attempt 1/5 for 10 pts. Part 2 What is the free cash flow inyear 1?
Attempt 1/5 for 10 pts. Part 3 What is the free cash flow inyear 2?
Attempt 1/5 for 10 pts.Part 4 What is the after-tax salvagevalue at the end of year 3?
Attempt 1/5 for 10 pts. Part 5 What is the free cash flow inyear 3?
Attempt 1/5 for 10 pts. Part 6 What is the NPV of thisproject?

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4.2 Ratings (567 Votes)

Initial Investment Base Price Installation Cost Initial Investment 24000 2000 Initial Investment 26000 Useful Life 3 years Depreciation Year 1 33 26000 Depreciation Year 1 8580 Depreciation Year 2 45 26000 Depreciation Year 2 11700 Depreciation Year 3 15 26000 Depreciation Year 3 3900 Answer 1 See Answer

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