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 $930,000, and it would cost

image text in transcribed

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $930,000, and it would cost another $16,500 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 $635,000. The machine would require an increase in net working capital (inventory) of $14,000. The sprayer would not change revenues, but it is expected to save the firm $436,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%. a. What is the Year 0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. 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)? Do not round intermediate calculations. Round your answer to the nearest dollar. d. If the project's cost of capital is 11 %, what is the NPV of the project? Do not round intermediate calculations. 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

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

Survey of Accounting

Authors: Carl S Warren

5th Edition

9780538489737, 538749091, 538489731, 978-0538749091

More Books

Students also viewed these Accounting questions

Question

Would I be a more effective student if I spent less time online?

Answered: 1 week ago

Question

Define Scientific Management

Answered: 1 week ago

Question

Explain budgetary Control

Answered: 1 week ago

Question

Solve the integral:

Answered: 1 week ago

Question

What is meant by Non-programmed decision?

Answered: 1 week ago