1. You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $60,000, and it would cost another $9,000 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 $27,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $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 $76,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%.

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

Year 1:

Year 2:

Year 3:

2. Maggie’s Muffins, Inc., generated $467,000.00 in sales during 2013, and its year-end total assets were $305,332.00. Also, at year-end 2013, current liabilities were $110,050.00, consisting of $20,500.00 of notes payable, $47,500.00 of accounts payable, and $42,050.00 of accruals. Looking ahead to 2014, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 4.50%, and its payout ratio will be 42.75%. How large a sales increase can the company achieve without having to raise funds externally—that is, what is it's self- supporting growth rate?

$22,611.85

$29,229.95

$32,539.00

$23,163.36

$27,575.42