In: Finance
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $910,000, 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 $650,000. 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 it is expected to save the firm $357,000 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.
Year 1: |
$ |
Year 2: |
$ |
Year 3: |
$ |
Should the machine be purchased?