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 8 0 , 0

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $980,000, and it would cost another $19,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $645,000. 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 $19,000. The sprayer would not change revenues, but it is expected to save the firm $378,000 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.
a What is the Year-0 net cash flow? $
b What are the net operating cash flows in Years 1,2, and 3?
c Year 1:
d $
e Year 2:
f $
g Year 3:
h $
i
j What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)?$
k If the project's cost of capital is 12%, what is the NPV of the project? $Should the machine be purchased?-Select-YesNo

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_2

Step: 3

blur-text-image_3

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

ISE Real Estate Finance And Investments

Authors: Jeffrey Fisher William B. Brueggeman

17th International Edition

1264892888, 9781264892884

More Books

Students also viewed these Finance questions