The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $880,000, and it would cost another $21,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $675,000. The machine would require an increase in net working capital (inventory) of $17,000. The sprayer would not change revenues, but it is expected to save the firm $479,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%.
- What is the Year-0 net cash flow?
$
- What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar.
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)? Round your answer to the nearest dollar.
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $880,000, and it would cost another $21,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $675,000. The machine would require an increase in net working capital (inventory) of $17,000. The sprayer would not change revenues, but it is expected to save the firm $479,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 35%.
- What is the Year-0 net cash flow?
$ - What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar.
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)? Round your answer to the nearest dollar.
Related questions
Problem 11-6
New-Project Analysis
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 $24,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $668,000. The machine would require an increase in net working capital (inventory) of $14,000. The sprayer would not change revenues, but it is expected to save the firm $454,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.
What is the Year-0 net cash flow?
$
What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar.
| 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)? Round your answer to the nearest dollar.
$
If the project's cost of capital is 14 %, what is the NPV of the project? Round your answer to the nearest dollar.
$
