Question: Can you help with the two I got wrong ? The Campbell Company is considering adding a robotic paint sprayer to its production line. The

Can you help with the two I got wrong ? The CampbellCan you help with the two I got wrong ?

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $890,000, and it would cost another $18,500 to instail it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $465,000. 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 $15,500. The sprayer would not change revenues, but it is expected to save the firm $371,000 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 outfiows, 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 ? Year 1: $ Year 2:$ Year 3: $ c. What is the additional Year-3 cash flow (l.e, the after-tax salvage and the return of working capital)? d. If the project's cost of capital is 10%, what is the NPV of the project? Should the machine be purchased

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!