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New Project Ana lysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000. and
New Project Ana lysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000. and it would cost another $1?,000 to install it. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $491,000. The MACRS rates for the rst three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in networking capital (inventory) of $14,000. The sprayer would not change revenues, but it is expected to save the lm $383,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight- line method.) Cash outows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. what is the Year0 net cash flow? $ b. what are the net operating cash ows in Years 1. 2, and 3? Year 1:$ Year 2:$ Year 3:$ c. what is the additional Year3 cash ow [i.e. the aftertax salvage and the return of working capital]?I 3: d. If the project's cost of capital is 13%, what is the NW of the project? $ Should the machine be purchased? -Seler:t- V
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