Business, 27.03.2020 04:08 twilov2878
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 $20,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $500,000. 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 $15,500. The sprayer would not change revenues, but it is expected to save the firm $304,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%.
Required:
(a) What is the Year-0 cash flow?
(b) What are the 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 capital)?
(d) If the project's cost of capital is 12%, what is the NPV?
Answers: 1
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Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's...
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