Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Campbel Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,140,000, and it would cost another

image text in transcribed
The Campbel Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,140,000, and it would cost another $18,500 to install it. The machine falls into the MACRS 3 -year dass, and it would be sold after 3 vears for $581,000. The MACRS rates for the first three vears are 0.3933 , 0.4445 , and 0.1481 . The machine would require an increase in net working capital (inventory) of $19,500, The sprayer would aot change revenues, but it is expected to save the firm $334,000 per year in before-tax operating costs, mainly labor, Campbelfs 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 oet operating cash flows in Years 1,2 , and 3 ? Year 1 : 5 Year 2:5 Year 3:5 c. What is the additional Year-3 cash flow (0.e, the after-tax salvage and the return of working capizal)? d. If the project's cost of capital is 10\%, 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_step_2

Step: 3

blur-text-image_step3

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

More Books

Students also viewed these Finance questions

Question

=+ (d) Even if F has jumps, E[ F(X)] ={ + E, P2[X=x].

Answered: 1 week ago