The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer costs

$1,102,500. The machine falls into the MACRS 3-year class, and it would be sold for $605,000 after 3 years.

The MACRS allowance percentages are 0.3333, 0.4445, 0.1481,and 0.0741 for Years 1, 2, 3, and 4 respectively The machine requires an increase in operating working capital of $15,500. The sprayer would not change revenues, but is expected to save the firm $850,000 per year, manual labor. The marginal tax rate is 35% and cost of capital is 10%.

What are the annual NOPAT throughout projects life?

What is the after-tax salvage value of the machine?

What are the annual NIOC throughout projects life? Should the machine be purchased under the NPV method? Hint. There is only one OWC in year 0, and its full recovery is in year 3?

If the cost of capital is 12%, should the machine be purchased under the NPV method?