Problem: New-Project Analysis
The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department The equipment's basic price is $100,000, and it would cost another $15,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $45,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $5,000. The machine would have no effect on revenues, but it is expected to save the firm $40,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 35%.
What is the Year-0 net cash flow? If the answer is negative, use minus sign. $
What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar.
Year 1 $
Year 2 $
Year 3 $
What is the additional (nonoperating) cash flow in Year 3? Round your answer to the nearest dollar. $