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The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's...

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Finance

The Campbell Company is considering adding a robotic paintsprayer to its production line. The sprayer's base price is$800,000, and it would cost another $16,500 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 $602,000. The machine would requirean increase in net working capital (inventory) of $19,500. Thesprayer would not change revenues, but it is expected to save thefirm $484,000 per year in before-tax operating costs, mainly labor.Campbell's marginal tax rate is 40%.

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