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Unformatted text preview: d. If the projects cost of capital is 10%, should the spectrometer be purchased? NPV=-6704 no purchase Known Information: Spectrometer Base Price: $70,000 Modifications: $15000 Salvage after 3 years: $30000 Net work Capital Increase: $4000 Cost savings before Taxes: $25000/year Marginal Fed and State tax rate: 40% a. What is the net cost of the spectrometer? Spectrometer Base Price: | - $70,000 | Modifications: | - $15,000 | Net work Capital Increase: | - $4,000 | Total Net cash flow: | -$89,000 | b. What are the net operating cash flows in Years 1, 2, and 3? After Tax = (25,000 * (1-0.40) = $15,000/year MARC 3-year Deprecation Rate = 33%, 45%, 15%, 7% c. What is the additional (non operating) cash flow in Year 3? d. If the projects cost of capital is 10%, should the spectrometer be purchased? Since the NPV is negative, reject the project...
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This note was uploaded on 01/31/2012 for the course FINANCIAL f1515 taught by Professor Karylfriedman during the Spring '11 term at Keller Graduate School of Management.
- Spring '11