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 Net Salvage Value?

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 Net Salvage Value?

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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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 $18,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $578,000. 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 $18,000. The sprayer would not change revenues, but it is expected to save the firm $345,000 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…
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $960,000, and it would cost another $22,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $451,000. 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 $12,500. The sprayer would not change revenues, but it is expected to save the firm $331,000 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. 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…
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he Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,080,000, and it would cost another $19,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $624,000. 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 $13,000. The sprayer would not change revenues, but it is expected to save the firm $370,000 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…
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The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,080,000, and it would cost another $18,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $634,000. 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 $14,500. The sprayer would not change revenues, but it is expected to save the firm $369,000 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…
Nikul
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Cori's Meats is looking at a new sausage system with an installed cost of $505,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $75,000. The sausage system will save the firm $185,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $34,000. If the tax rate is 25 percent and the discount rate is 8 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 553,988.52

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