Question

What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow

Answer 1

Answer:

$215,000

Explanation:

this question is not complete. here is the full question :

New project analysis-- You must evaluate a proposed spectrometer for the R&D department. The base price is $180,000, and it would cost another $27,000 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 $90,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. 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 $79,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.*********** What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow?

the initial cash outlay = cost of the spectrometer + net working capital

cost of the spectrometer = base price + cost of modification

$180,000 + $27,000 = $207,000

$207,000 + $8,000 = $215,000