Lowell Company is considering adding a robotic paint sprayer to the production line. The prayer’s base price is $100,000, and it would cost another $10,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $33,000. The MACRS rates for the first three years are 33%, 45%, and 15%. The machine would require and, increase in net working capital of $6,600. The sprayer would not change revenues, but it is expected to save the firm $40,000 per year in before tax operating costs, mainly labor. Lowell’s marginal tax rate (federal plus state) is 25%. If the project’s cost of capital is 6%, What is the TOTAL FREE CASH FLOW FOR YEAR 3? Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value $70,250 $64,550 $67,400 $64,800
Lowell Company is considering adding a robotic paint sprayer to the production line. The prayer’s base price is $100,000, and it would cost another $10,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $33,000. The MACRS rates for the first three years are 33%, 45%, and 15%. The machine would require and, increase in net working capital of $6,600. The sprayer would not change revenues, but it is expected to save the firm $40,000 per year in before tax operating costs, mainly labor. Lowell’s marginal tax rate (federal plus state) is 25%.
If the project’s cost of capital is 6%,
What is the TOTAL
Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value
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$70,250 |
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$64,550 |
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$67,400 |
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$64,800 |
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