The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$1,010,000, and it would cost another $20,500 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $617,000. 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 $13,000. The sprayer
would not change revenues, but it is expected to save the firm
$395,000 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 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?
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $
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