New project analysis
Not what you're looking for?
New-Project Analysis
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,090,000, and it would cost another $23,500 to install it. The machine falls into the MACRS 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 $519,000. The machine would require an increase in net working capital (inventory) of $19,500. The sprayer would not change revenues, but it is expected to save the firm $377,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.
What is the Year-0 net cash flow?
$
What are the net operating cash flows in Years 1, 2, and 3? Round your answers to the nearest dollar.
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)? Round your answer to the nearest dollar.
$
If the project's cost of capital is 14 %, what is the NPV of the project? Round your answer to the nearest dollar.
$
Should the machine be purchased?
Purchase this Solution
Solution Summary
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,090,000, and it would cost another $23,500 to install it.
Education
- MPhil, Madurai Kamaraj University
- MCom, Annamalai University
- IATA, International Air Transport Association
Recent Feedback
- "Great explanations on how the answers were obtained."
- "Love the way she explains everything step by step."
- "Solutions were thoroughly explained."
- "Excellent explanations of how problems are solved"
- "Thanks"
Purchase this Solution
Free BrainMass Quizzes
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.