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You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase...

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Finance

You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price of the spectrometer including modifications is $150,000, and the equipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $29,000. The equipment would require a $12,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $45,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 25%.

  1. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar. $ _______
  2. 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: $ _______
  3. If the WACC is 12%, should the spectrometer be purchased? -Select- Yes No

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