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I answered some questions, but not sure if they are correct. Please provide answers for everything. Problem 13-6 New-Project Analysis The Campbell Company is considering
I answered some questions, but not sure if they are correct. Please provide answers for everything.
Problem 13-6 New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $800,000, and it would cost another $22,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $627,000. The MACRS rates for the first three years are 0.3333, 0.4445, 0.1481, and 0.0741. The machine would require an increase in net working capital (inventory) of $18,000. The sprayer would not change revenues, but it is expected to save the firm $454,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%. a. What is the Year-0 net cash flow? If the answer is negative, use minus sign. $-840000 b. What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar. Year 1 $ 381989 $418552 $321095 Year 2 c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? Round your answer to the nearest dollar. $657354 d. If the project's cost of capital is 13 %, what is the NPV of the project, Round your answer to the nearest dolla Should the machine be purchasedStep by Step Solution
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