Question: The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1, 080,000, and it would tort

 The Campbell Company is considering adding a robotic paint sprayer to

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1, 080,000, and it would tort another $22, 500 to install it. The machine falls into the MACRS 3-year class, and it would be told after 3 years for $605,000. 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 $15, 500. The sprayer would not change revenues, but it is expected to save the firm $380.000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%. a. What is the Year 0 net cash flow? b. What are the net operating cash flows in Years 1, 2, and 3? c. What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capita)? d. If the project's cost of capital is 12%, 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!