You must evaluate a proposed spectrometer for the R&D; department. The base pric

Question

You must evaluate a proposed spectrometer for the R&D; department. The base price is $170,000, and it would cost another $42,500 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 $68,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $11,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $59,000 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.)

Explanation / Answer

Year 0 project cash flows = $170000 + $42500 + $11000 = $223500

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