Question: The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000, and it would cost another
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000, and it would cost another $24,500 to install it. The machine falls into the MACRS 3 -year class, and it would be soid after 3 years for $458,000. 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 $14,500. The sprayer would not change revenues, but it is expected to save the firm $338,000 per year in before-tax operating costs, mainly labor. Campbeil's marginal tax rate is 25%. (Ignore the haif-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate caiculations. Round your answers to the nearest dolar. a. What is the Year-0 net cash flow? 5 b. What are the net operating cash nows in Years 1, 2 , and 3 ? Year 1:5 Year 2i5 Year 3is c. What is the addibonal Year-3 cash flow (i.e, the after-tax salvage and the return of working capitai)? 5 Should the machine be purchased
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
