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 $1,080,000, and it would

image text in transcribed
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 $1,080,000, and it would cost another $24,500 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 $638,000. The machine would require an increase in net working capital (inventory) of $18,500. The sprayer would not change revenues, but it is expected to save the firm $389,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%. 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 ? Year 1 : $ Year 2: $ Year 3 : $ c. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? $ Year2:5Year3:$ c. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? d. If the project's cost of capital is 13%, what is the NPV of the project? $ 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

Fintech In Islamic Finance Theory And Practice

Authors: Umar A. Oseni, S. Nazim Ali

1st Edition

1138494801, 978-1138494800

More Books

Students also viewed these Finance questions

Question

1. What is the difference between the mind and the brain?

Answered: 1 week ago

Question

Additional Factors Affecting Group Communication?

Answered: 1 week ago