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

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Finance

The Campbell Companyis considering adding a robotic paint sprayer to its productionline. The sprayer's base price is $800,000, and it would costanother $23,500 to install it. The machine falls into the MACRS3-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$592,000. The machine would require an increase in net workingcapital (inventory) of $10,500. The sprayer would not changerevenues, but it is expected to save the firm $371,000 per year inbefore-tax operating costs, mainly labor. Campbell's marginal taxrate is 30%.

  1. What is the Year 0 netcash flow?
  2. What are the net operatingcash flows in Years 1, 2, and 3? Do not round intermediatecalculations. Round your answers to the nearest dollar.

Year 1_____

Year 2 ______

Year 3 _____

   c. What is theadditional Year 3 cash flow (i.e, the after-tax salvage and thereturn of working capital)? Do not round intermediate calculations.Round your answer to the nearest dollar.

   d. If theproject's cost of capital is 11 %, what is the NPV of the project?Do not round intermediate calculations. Round your answer to thenearest dollar.

   e. Should themachine be purchased?

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