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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 $21,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $700,000. The MACRS rates for the first three years are 0.3333, 0.4445, 0.1481, and 0.0741. 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 $426,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.

What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? Round your answer to the nearest dollar.

$

If the project's cost of capital is 12 %, what is the NPV of the project? Round your answer to the nearest dollar.

$

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92752901

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