Question
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 $850,000, 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 $649,000. 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 $13,000. The sprayer would not change revenues, but it is expected to save the firm $373,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.
Please solve in Excel and provide Excel Formulas.
A) What is the Year-0 net cash flow?
B) What are the net operating 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 11%, what is the NPV of the project?
E) Should the machine be purchased? (Yes or No)
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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
$940,000, and it would cost another $19,500 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $591,000. 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 $20,000. The sprayer
would not change revenues, but...
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
$1,030,000, and it would cost another $25,000 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $490,000. 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 $18,000. The sprayer
would not change revenues, but...
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
$850,000, and it would cost another $21,500 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 $532,000. The machine would require
an increase in net working capital (inventory) of $13,000. The
sprayer would not change revenues, but it is...
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
$950,000, and it would cost another $22,000 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $560,000. 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 $14,000. The sprayer
would not change revenues, but...
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
$1,150,000, and it would cost another $20,000 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
would be sold after 3 years for $580,000. The machine would require
an increase in net working capital (inventory) of $13,000. The
sprayer would not change revenues, but it is...
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
$1,060,000, and it would cost another $23,500 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 $526,000. The machine would require
an increase in net working capital (inventory) of $14,000. The
sprayer would not change revenues, but it is...
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
$980,000, and it would cost another $17,500 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 $628,000. The machine would require
an increase in net working capital (inventory) of $17,000. The
sprayer would not change revenues, but it is...
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
$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
would be sold after 3 years for $571,000. The machine would require
an increase in net working capital (inventory) of $20,000. The
sprayer would not change revenues, but it is...
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
$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
years are 0.3333, 0.4445, and 0.1481. The machine would require an
increase in net working capital (inventory) of $16,000. The sprayer
would not change revenues, but...
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
$810,000, and it would cost another $20,000 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
would be sold after 3 years for $638,000. The machine would require
an increase in net working capital (inventory) of $16,000. The
sprayer would not change revenues, but it is...
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