The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,070,000, and it would cost another $21,500 to install it. The machine falls into theMACRS 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 $696,000. The machine would require an increase in networking capital (inventory) of $15,000. The sprayer would not change revenues, but it is expected to save the firm $405,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rateis 30%.a. What is the Year 0 net cash flow?b. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.Year 1Year 2Year 3c. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.$d. If the project's cost of capital is 13 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.

NPV net present value is the difference between present value of cash flow and initial investment of…

Answered: ACRS 3-year class (the applicable MACRS…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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