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 $830,000, and it would

image text in transcribed
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, and it would cost another $19,500 to insta it. The machine falls into the MACRS 3 -year class, and it would be sold after 3 years fo $476,000. The MACRS rates for the first three years are 0.3333,0.4445, and 0.1481. 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 $304,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar. a. What is the Year-0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? Year1:$Year2:$Year3:$ c. What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? 5 d. If the project's cost of capital is 12%, what is the NPV of the project? 5 Should the machine be purchased

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_2

Step: 3

blur-text-image_3

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

Entrepreneurial Finance Venture Capital Deal Structure And Valuation

Authors: Janet Kiholm Smith, Richard L. Smith

2nd Edition

1503603210, 978-1503603219

More Books

Students also viewed these Finance questions