Question
In: Finance
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
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 $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 $632,000. The machine would require an increase in net working capital (inventory) of $16,500. The sprayer would not change revenues, but it is expected to save the firm $433,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%. 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? Year 1: $ Year 2: $ Year 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? (yes or No)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$1,000,000, and it would cost another $19,000 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 $628,000. The machine would require
an increase in net working capital (inventory) of $13,500. The
sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$890,000, and it would cost another $20,500 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $637,000. 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 $17,500. The sprayer
would not change...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$1,000,000, and it would cost another $21,000 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $549,000. 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 $18,500. The sprayer
would not change...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$890,000, and it would cost another $19,500 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 $623,000. The machine would require
an increase in net working capital (inventory) of $20,000. The
sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$1,040,000, and it would cost another $20,500 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 $663,000. The machine would require
an increase in net working capital (inventory) of $9,000. The
sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
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 $25,000 to install it. The
machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $581,000. 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 $17,000. The sprayer
would not change...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis The Campbell Company is considering adding
a robotic paint sprayer to its production line. The sprayer's base
price is $1,020,000, 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 $631,000. The machine would
require an increase in net working capital (inventory) of $20,000.
The sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project
Analysis
The Campbell Company
is considering adding a robotic paint sprayer to its production
line. The sprayer's base price is $1,000,000, and it would cost
another $23,000 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
$620,000. The machine would require an increase in net working
capital (inventory) of $14,000. The sprayer would not change
revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project Analysis
The Campbell Company is considering adding a robotic paint
sprayer to its production line. The sprayer's base price is
$820,000, 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 $566,000. The machine would require
an increase in net working capital (inventory) of $9,500. The
sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line....
New-Project
Analysis
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 $23,000 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
$637,000. The machine would require an increase in net working
capital (inventory) of $19,000. The sprayer would not change
revenues, but...
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