Question

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, 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 $543,000. 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 it is expected to save the firm $386,000 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.

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 13%, what is the NPV of the project?

Should the machine be purchased? Y/N

I am using excel formulas, I need excel formulas of the depreciation. Please and Thank you.

Answer 1

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I DONT KNOW HOW EXCEL CELLS ARE POSITIONED. IF I HAVE EXCEL CELL POSITIONS, I CAN TELL YOU HOW TO CALCULATE DEPRECIATION.

DEPRECIATION = COST X RATE