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The Johnson Company is considering the replacement of an existing spectrometer with a new spectrometer; faster and with expanded capacity. If the new spectrometer is purchased, the existing (old) computer will be sold for $80,000 immediately. The existing spectrometer was purchased three (3) years ago for $500,000. It is being depreciated under the 3-year MACRS schedule. The salvage value at the end of its six-year life will be $50,000. The new spectrometer will be purchased for $800,000. If the new spectrometer is purchased, accounts receivable increase immediately by $25,000; accruals will increase immediately by $40,000; and accounts payable will increase immediately by $30,000. The UFRO Company has a 30% corporate tax rate. Shipping and installation will cost UFRO $80,000; and the modifications to the building will be $100,000.

If the new spectrometer is purchased, sales in year 1 will be $700,000, sales in year 2 will be $900,000, and sales in year 3 will be $950,000. Without the new spectrometer, sales will be $400,000 in year 1; $400,000 in year 2 and $400,000 in year 3. Operating expenses with the new spectrometer will be 40% of sales; with the old spectrometer those costs are 45% of sales. The new computer will be depreciated using the 3-year MACRS schedule [yr.1: 33%; yr. 2: 45%; yr. 3: 15%; and yr. 4: 7%]. It is expected that the new spectrometer will be sold after three (3) years for $180,000. The UFRO Company has a cost of capital of 12%.

Calculate the NPV, IRR, PAYBACK and MIRR.

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