Question: hi I have a hard time understanding this question, would you be able to guide through it? The Campbell Company is considering adding a robotic
hi I have a hard time understanding this question, would you be able to guide through it?
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 $25,000 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 $580,000. The machine would require an increase in net working capital (inventory) of $12,000. The sprayer would not change revenues, but it is expected to save the firm $436,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%. Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.
- What is the Year-0 net cash flow?
- $
- What are the net operating cash flows in Years 1, 2, and 3?
- Year 1:$Year 2:$Year 3:$
- What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)?
- $
- If the project's cost of capital is 15 %, what is the NPV of the project?
- $
- Should the machine be purchased?
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