The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayers base price is $1,080,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $605,000. The MACRS rates for the first 3 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 $380,000 per year in before-tax operating costs, mainly labor. Campbells marginal tax rate is 35%. a. What is the Year-0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3?

I need helo with part (C). How did the 7.41% get calculated? How do I find that number?

C. The machine would be sold at $605,000 at the end of year three. The additional cash flow at the end of year 3 will be computed as follows Particulars Amount Salvage value $605,000 Less: depreciation (S 1,102,500 x7.41%)-$81,695 | 81,695 Salvage value after depreciation 523,305 Less: tax @35% 183,157 Salvage value after tax ($605,000-$183,157) tax ($605,000-$183,157 421.843 Add: increase in net working capital 15,500 Additional cash flow 437,343