1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
neonofarm [45]
3 years ago
7

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $60,000, and it would co

st another $12,000 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 $21,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. 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 $58,000 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? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign.
$

What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent.

In Year 1 $

In Year 2 $

In Year 3 $

If the WACC is 12%, should the spectrometer be purchased?
Business
1 answer:
Nesterboy [21]3 years ago
4 0

Answer: The initial investment outlay is $84,000.

Explanation:

Initial investment Outlay

= -60,000 - 12,000 - 12,000

= -$84,000

The project’s annual after-tax operating cash flows

Particulars Year 1

Revenues 0

operating Savings 58000

less Depreciation

(60000 + 12000) x 33%, - 23760

PBIT 34240

less Tax at 40% on PBIT - 13696

PAT 20544

Add Depreciation

(60000 + 12000) x 33% = 23760

Annual cash flows after tax = 44304

project’s annual after-tax operating cash flows

Particulars Year 2

Revenues 0

operating Savings 58000

less Depreciation

(60000 + 12000) x 45%,= 32400

PBIT 25600

lessTax at 40% on PBIT - 10240

PAT 15360

Add Depreciation

(60000 + 12000) x 45% = 32400

Annual cash flows after tax 47760

project’s annual after-tax operating cash flows

Particulars Year3

Revenues 0

operating Savings 58000

less Depreciation

(60000 + 12000) x 15% - 10800

PBIT 47200

less Tax at 40% on PBIT - 18880

PAT 28320

Add Depreciation

(60000 + 12000) x 15% 10800

Annual cash flows after tax = 39120

You might be interested in
In Macroland, autonomous consumption equals 100, the marginal propensity to consume equals 0.75, net taxes are fixed at 40, plan
alina1380 [7]

Answer:

B) 1,160.

Explanation:

First we must calculate planned aggregate expenditures (PAE) and then determine where Y = PAE:

PAE = consumption + planned investment + government spending + net exports = 100  + 0.75(Y - 40) + 50 + 150 +20 = 100 + 0.75Y - 30 + 50 + 150 + 20 = 290 + 0.75Y

Now we must determine where Y and PAE intercept:

Y = 290 + 0.75Y

Y - 0.75Y = 290

0.25Y = 290

Y = 290 / 0.25 = 1,160

*Planned aggregate expenditure = total planned spending, it differs from GDP because GDP includes unplanned investment.

PAE = C + Ip + G + NX   while  GDP = C + I + G + NX

5 0
2 years ago
when the federal government's expenditures for a year are greater than its revenue for that year, the difference is known as wha
Lera25 [3.4K]

Answer:

A budget deficit

Explanation:

A budget deficit arises when the governments spend more than it has collected.  The government 's main source of revenue is taxes and levies it imposes on businesses and individuals. Its expenses include salaries for public employees, social welfare, and expenditures on public goods and infrastructure development projects.

A budget deficit contrasts a budget surplus, which occurs when a government intends to spend less than it has collected. Budget deficits result in government borrowing from either the domestic or foreign markets.  A balanced budget is when the collected revenues match the planned expenditures.

8 0
3 years ago
While building the ancient pyramids, the Egyptians performed several management functions. They submitted written requests and c
geniusboy [140]

Answer:

a, b and c i.e Organizing, Planning and Controlling

Explanation:

Note: <u>Since more than one option is to be selected, the three terms have been provided as an answer</u>

Organizing is the management function concerned with creation of organizational hierarchy, defining roles and objectives and authority and reporting responsibilities.

Planning refers to providing for unforeseen future events and deciding the ways to deal with them.

Directing refers to the management function of guiding, supervising and leading people with an objective to meet organizational goals and extract efficient performance.

In the given case, written request signifies planning, creation of a staff and consulting before arriving at decisions refers to organizing and controlling function.

4 0
3 years ago
Round Hammer is comparing two different capital structures: An all-equity plan (Plan I) and a levered plan (Plan II). Under Plan
amid [387]

Answer:

A) total debt = $2,230,000 and it represents 175,000 - 125,000 = 50,000 outstanding shares

price per share = $2,230,000 / 50,000 = $44.60 per share

B) enterprise value = 175,000 x $44.60 =  $7,805,000

According to M&M proposition I, the enterprise value is the same with or without any outstanding debt. So the company's value is the same for both alternatives.

5 0
3 years ago
Coach valentine does not think that his team is playing up to its full potential. to increase the performance of the team, the c
matrenka [14]
Set specific, challenging, and reachable goals for the team. In addition, goal setting is the procedure of classifying to some degree that a team want to achieve and founding quantifiable goals and timeframes. When the team decide on a technique change to win the game in which this is an example of goal setting.
5 0
3 years ago
Other questions:
  • Aaron Nance is a freshman in college who has not yet decided on his major. He is thinking about majoring in operations managemen
    8·1 answer
  • The freedom to make your own decisions can be limited if the business you choose is a
    13·1 answer
  • In 2015, government spending was $3.80 trillion, tax revenue was $4.50 trillion, GDP was $14.12 trillion, and total consumer spe
    15·1 answer
  • Shear-it, Inc., produces paper shredders. Shear-it is considering a new shredder design for home offices. The marketing vice pre
    7·1 answer
  • Process of tracking customer contacts and providing the customer with a price quote is
    9·1 answer
  • A. He should utilize lean manufacturing.
    7·1 answer
  • Star Corp., a publicly traded, accrual-method C corp., incurred the following expenses in 2020 (all of which are ordinary and ne
    14·1 answer
  • Select the correct answer.
    13·1 answer
  • If you double the thickness of a wall built from a homogeneous material, the rate of heat loss for a given temperature differenc
    9·1 answer
  • Fairlawn Partners Consulting is a management-consulting firm that provides its expertise to businesses that employ its services.
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!