Question: The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $840,000, 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 $840,000, and it would cost another $24,000 to install it. The machine falls into the MACRS 3 -year class, and it would be sold after 3 years for $479,000. 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 (irventory) of $19,000. The sprayer would not change revenues, but it is expected to save the firm $333,000 per year in before-tax opernting costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half year convention for the itraight-line mothod.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations, Round your angwers to the nearest dollar. a. What is the Year- 0 not cash flow? b. What are the project recurring cash flows in Years 1, 2, and 3 ? Year 1:5 Year 2:5 Year 3:5 5. What is the additional Year-3 cash flow (1.e, the after-tax salvage and the return of workdng capital)? 5 d. If the project's cost of capital is 10%, what is the NPN of the project
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
