Question
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000, and it would cost another
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000, and it would cost another $20,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $500,000. 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 $15,500. The sprayer would not change revenues,but it is expected to save the firm $304,000 per year in before tax operating cost, mainly labor. Campbells margin rate is 25%. What is year 0 cash flow and the cash flow for 1,2,3. If cost of capital is 12% what is the NPV.
Study guide question ex. can't figure how to put it together and get the initial cost
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