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You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $190,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $32,000. The equipment would require an $8,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $21,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year O project cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar. $ b. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: $ Year 2: $ Year 3: $ c. If the WACC is 14%, should the spectrometer be purchased? -Select- Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $625,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half- year convention for the straight-line method). The company's WACC is 10%, and its tax rate is 30%. a. What would the depreciation expense be each year under each method? Enter your answers as positive values. Round your answers to the nearest dollar. Year Scenario 2 Scenario 1 (Straight-Line) (Bonus Depreciation) 0 1 2 3 4 b. Which depreciation method would produce the higher NPV? -Select- How much higher would the NPV be under the preferred method? Do not round intermediate calculations. Round your answer to the nearest dollar. $

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