Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $ 9 9 0 , 0

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $990,000, and it would cost another $20,000 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 $579,000. The machine would require an increase in net
working capital (inventory) of $16,000. The sprayer would not change revenues, but it is expected to save the firm $465,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax
rate is 35%.
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 10%, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions