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In: Finance

Needs to be done in excel showing all the work The Campbell Company is considering adding...

Needs to be done in excel showing all the work

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $920,000, and it would cost another $20,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $500,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $304,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%.

a. What is the Year-0 cash flow?

b. What are the cash flows in Years 1, 2, and 3?

c. What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)?

d. If the project's cost of capital is 12%, what is the NPV?

Solutions

Expert Solution

All figures are rounded. If you want to round it to 2 decimals, let me know will do that. Earlier whenever i did this type of sum, all figures are asked to rounded.

jeff jeffy answered 4 months ago
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