Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,050,000, and it would

New-Project Analysis

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,050,000, and it would cost another $25,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $595,000. The machine would require an increase in net working capital (inventory) of $19,000. The sprayer would not change revenues, but it is expected to save the firm $455,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%. Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.

  1. What is the Year-0 net cash flow?

    $

  2. What are the net operating cash flows in Years 1, 2, and 3?

    Year 1: $
    Year 2: $
    Year 3: $

  3. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)?

    $

  4. If the project's cost of capital is 10 %, what is the NPV of the project?

    $

    Should the machine be purchased?

    -Select-YesNo

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial And Managerial Accounting

Authors: Nonso E Okpala

1st Edition

1634873904, 9781634873901

More Books

Students also viewed these Finance questions

Question

Distinguish between HRD and human resource management (HRM)

Answered: 1 week ago

Question

Define what the four-fifths rule is.

Answered: 1 week ago