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In: Finance
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's...
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $800,000, and it would cost another $16,500 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 $602,000. The machine would require an increase in net working capital (inventory) of $19,500. The sprayer would not change revenues, but it is expected to save the firm $484,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.
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Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
IF YOU NEED TO CALCULATE NPV, PROVIDE THE DISCOUNT RATE, WILL DO THAT ALSO
jeff jeffy answered 6 months agoRelated Solutions
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machine falls into the MACRS 3-year class (the applicable MACRS
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after 3 years for $560,000. The MACRS rates for the first three
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depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it
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depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it
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sprayer to its production line. The sprayer's base price is
$930,000, and it would cost another $25,000 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
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sprayer to its production line. The sprayer's base price is
$950,000, and it would cost another $23,500 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $548,000. The MACRS rates for the first three
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increase in net working capital (inventory) of $16,000. The sprayer
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