Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $810,000, and it would cost another

image text in transcribed

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $810,000, and it would cost another $23, 500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $606,000. 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 $10, 500. The sprayer would not change revenues, but it is expected to save the firm $387,000 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? $ b. What are the net operating cash flows in Years 1, 2, and 3? 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 12 %, what is the NPV of the project

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

The Ultra High Net Worth Bankers Handbook

Authors: Heinrich Weber, Stephan Meier

1st Edition

1905641753, 978-1905641758

More Books

Students also viewed these Finance questions

Question

sharing of non-material benefits such as time and affection;

Answered: 1 week ago