FIN $308$

Capital Budgeting Activity

The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine's

base price is $$108,000$ and it would cost another $$12,500$ to modify it for special use. The machine falls

into the MACRS $3-$year class, and it would be sold after $3$ years for $$65,000.$ The machine would require

an increase in net working capital of $$5,500.$ The milling machine would have no effect on revenues, but

it is expected to save the firm $$44,000$ per year in before$-$tax operating costs. The firm's marginal tax

rate is $35\%.$

Calculate the cash flows for this project and determine if this project should be accepted using NPV$.$ The

firm's cost of capital is $12\%.$

All calculations must be completed within Excel, using cell references and financial functions.The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine$$s base price is $$108,000$ and it would cost another $$12,500$ to modify it for special use. The machine falls into the MACRS $3-$year class, and it would be sold after $3$ years for $$65,000.$ The machine would require an increase in net working capital of $$5,500.$ The milling machine would have no effect on revenues, but it is expected to save the firm $$44,000$ per year in before$-$tax operating costs. The firm$$s marginal tax rate is $35\%.$

Calculate the cash flows for this project and determine if this project should be accepted using NPV$.$ The firm$$s cost of capital is $12\%.$

All calculations must be completed within Excel, using cell references and financial functions.