) The Reynold Company is considering adding a robotic paint sprayer to its production line. The sprayers base price is $1,200,000, and it would cost another $18,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $770,000. 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 $19,500. The sprayer would not change revenues, but it is expected to save the firm $420,000 per year in before-tax operating costs, mainly labor. Campbells marginal tax rate is 28%. Find the initial investment outlay, the annual depreciation, the yearly operating cash flow, the terminal cash flow, and decide whether the firm should accept the project.

WACC=10%