The president of the company you work for has asked you to evaluate the proposed acquisition...

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Finance

The president of the company you work for has asked you toevaluate the proposed acquisition of a new chromatograph for thefirm’s R&D department. The equipment's basic price is $90,000,and it would cost another $13,500 to modify it for special use byyour firm. The chromatograph, which falls into the MACRS 3-yearclass, would be sold after 3 years for $40,500. The MACRS rates forthe first 3 years are 0.3333, 0.4445 and 0.1481. Use of theequipment would require an increase in net working capital (spareparts inventory) of $4,500. The machine would have no effect onrevenues, but it is expected to save the firm $36,000 per year inbefore-tax operating costs, mainly labor. The firm's marginalfederal-plus-state tax rate is 35%.
What is the Year 0 net cash flow? If the answer is negative,use parentheses.
$

What are the net operating cash flows in Years 1, 2, and 3? Donot round intermediate calculations. Round your answers to thenearest dollar.
Year 1 $
Year 2 $
Year 3 $

What is the additional (nonoperating) cash flow in Year 3? Donot round intermediate calculations. Round your answer to thenearest dollar

Answer & Explanation Solved by verified expert

4.1 Ratings (825 Votes)

Year 0 net cash flow equipments basic price modification cost working capital investment 90000 13500 4500 108000 108000 Net Operating cash flows for year 1 2 3 please see the table below Yellow colored See Answer

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