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 $ 9 3 0 , 0

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 $20,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $509,000. 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 $18,500. The sprayer would not change revenues, but it is expected to save the firm $366,000 per year in before-tax operating costs, mainly labor. Campbell's 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.
What is the Year-0 net cash flow?
$
What are the net operating cash flows in Years 1,2, and 3?
Year 1: $
Year 2: $
Year 3: $
What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)?
$
If the project's cost of capital is 15%, what is the NPV of the project?
$
Should the machine be purchased?
-Select-
image text in transcribed

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

Business Analysis And Valuation Using Financial Statements Text And Cases

Authors: Krishna G. Palepu, Paul M. Healy, Victor L Bernard

3rd Edition

0324118945, 9780324118940

More Books

Students also viewed these Finance questions

Question

Identify ways to increase your selfesteem.

Answered: 1 week ago