...Terminal Cash Flows? Here is the question:
You must evaluate a proposed spectrometer for the R&D department. The base price is $60,000, and it would cost another $15,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $27,000. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. The equipment would require an $12,000 increase in working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $68,000 per year before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
We're supposed to find Net Cost of the spectrometer.
Then find the Net Operating Cash Flows for years 1, 2, and 3.
Then find the Terminal Cash Flow.
I cant figure this out. I've looked through the book, emailed my professor, and googled. Can anyone please help me!
I found that Net Cost is 87,000.
You must evaluate a proposed spectrometer for the R&D department. The base price is $60,000, and it would cost another $15,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $27,000. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. The equipment would require an $12,000 increase in working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $68,000 per year before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.
We're supposed to find Net Cost of the spectrometer.
Then find the Net Operating Cash Flows for years 1, 2, and 3.
Then find the Terminal Cash Flow.
I cant figure this out. I've looked through the book, emailed my professor, and googled. Can anyone please help me!
I found that Net Cost is 87,000.