Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 $1,080,000, and
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 $1,080,000, and it would cost another $20,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $632,000. 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 $20,000. The sprayer would not change revenues, but it is expected to save the firm $399,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%. a. What is the Year-0 net cash flow? If the answer is negative, use minus sign. b. What are the net operating cash flows in Years 1, 2, and 3 Round your answers to the nearest dollar. 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)? Round your answer to the nearest dollar d. If the project's cost of capital is 15 %, what is the NPV of the project? Round your answer to the nearest dollar. Should the machine be purchased? -Select
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started