Question Workspace Check My Work (1 remaining) eBook Problem Walk-Through New-Project Analysis The Campbell Company is considering adding a robotic...

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Question Workspace
Check My Work (1 remaining)
eBook
Problem Walk-Through
New-Project Analysis
The Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$1,090,000, and it would cost another $22,500 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 $627,000. The machine would requirean increase in net working capital (inventory) of $16,500. Thesprayer would not change revenues, but it is expected to save thefirm $430,000 per year in before-tax operating costs, mainly labor.Campbell's marginal tax rate is 30%. Cash outflows, if any, shouldbe indicated by a minus sign. Do not round intermediatecalculations. 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-taxsalvage and the return of working capital)?
$
If the project's cost of capital is 13 %, what is the NPV of theproject?
$
Should the machine be purchased?
-Select-YesNo

Answer & Explanation Solved by verified expert

4.3 Ratings (697 Votes)

Initial Investment Base Price Installation Cost Initial Investment 1090000 22500 Initial Investment 1112500 Useful Life 3 years Depreciation Year 1 3333 1112500 Depreciation Year 1 37079625 Depreciation Year 2 4445 1112500 Depreciation Year 2 49450625 Depreciation Year 3 1481 1112500 Depreciation Year See Answer

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Question WorkspaceCheck My Work (1 remaining)eBookProblem Walk-ThroughNew-Project AnalysisThe Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$1,090,000, and it would cost another $22,500 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 $627,000. The machine would requirean increase in net working capital (inventory) of $16,500. Thesprayer would not change revenues, but it is expected to save thefirm $430,000 per year in before-tax operating costs, mainly labor.Campbell's marginal tax rate is 30%. Cash outflows, if any, shouldbe indicated by a minus sign. Do not round intermediatecalculations. Round your answers to the nearest dollar.What is the Year-0 net cash flow?$ 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-taxsalvage and the return of working capital)?$ If the project's cost of capital is 13 %, what is the NPV of theproject?$ Should the machine be purchased?-Select-YesNo