New-Project Analysis 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 $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $485,000. 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 revenues, but it is expected to save the firm $351,000 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.   What is the Year-0 net cash flow? $    What are the net operating cash flows in Years 1, 2, and 3?   Year 1: $    Year 2: $    Year 3: $      What is the additional Year-3 cash flow (i.e, the after-tax salvage and the return of working capital)? $    If the project's cost of capital is 12%, what is the NPV of the project? $

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New-Project Analysis

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 $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $485,000. 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 revenues, but it is expected to save the firm $351,000 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.

 

  1. What is the Year-0 net cash flow?

    $   

  2. What are the net operating cash flows in Years 1, 2, and 3?

     

    Year 1: $   
    Year 2: $   
    Year 3: $   

     

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

    $   

  4. If the project's cost of capital is 12%, what is the NPV of the project?

    $   

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4. If the project's cost of capital is 12%, what is the NPV of the project?

$   209,845

I'm still trying to figure out this last part. The homework says this is wrong, but I cannot follow your work to see if there is just an error in the decimals. Please explain how you got this last part. 

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