A project has an initial cost of $47,325, expected net cashinflows of $9,000 per year for 11 years, and a cost of capital of8%. What is the project's NPV? (Hint: Begin byconstructing a time line.) Do not round your intermediatecalculations. Round your answer to the nearest cent.
Net Salvage Value
Allen Air Lines must liquidate some equipment that is beingreplaced. The equipment originally cost $19 million, of which 85%has been depreciated. The used equipment can be sold today for$4.75 million, and its tax rate is 40%. What is the equipment'safter-tax net salvage value? Write out your answer completely. Forexample, 2 million should be entered as 2,000,000.
The Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$950,000, and it would cost another $20,500 to install it. Themachine falls into the MACRS 3-year class (the applicable MACRSdepreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and itwould be sold after 3 years for $691,000. The machine would requirean increase in net working capital (inventory) of $14,500. Thesprayer would not change revenues, but it is expected to save thefirm $462,000 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? Donot round intermediate calculations. Round your answers to thenearest dollar.
- What is the additional Year 3 cash flow (i.e, the after-taxsalvage and the return of working capital)? Do not roundintermediate calculations. Round your answer to the nearestdollar.
$
- If the project's cost of capital is 14 %, what is the NPV ofthe project? Do not round intermediate calculations. Round youranswer to the nearest dollar.
$
Should the machine be purchased?
-Select-YesNoItem 7
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