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Vaselesa [24]
3 years ago
5

You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $250,000, and it would c

ost another $50,000 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 $125,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $32,000 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?
Business
1 answer:
malfutka [58]3 years ago
3 0

Answer:

$332,000

Explanation:

Initial investment refers to the cash outflow needed to begin a project or start a business. It includes capital expenditure, modification cost, and working capital needed.

Based on this, the initial investment outlay can be calculated as follows:

Initial investment outlay = Base price + Additional modification cost + Net operating working capital = $250,000 + $50,000 + $32,000 = $332,000

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Answer:

Some costs have been incurred already, and therefore do not change across alternatives in some current or future decision.

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Sunk costs are <u>costs that have already been incurred by a business and cannot be recovered</u>. For this reason, they are irrelevant to current and future business decisions.

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The greenhouse effect is caused solely by human activity.<br> a. True<br> b. False
notsponge [240]
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Assume that consumers in a nation reduce their marginal propensity to save from 0.25 to 0.2 though their personal incomes initia
umka21 [38]

Answer:

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