Adding robotic paint sprayer to its production line

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Reference no: EM132028575

New-Project Analysis:

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,016,000.00, and it would cost another $29,000.00 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 $533,000.00. The machine would require an increase in net working capital (inventory) of $7,400.00. The sprayer would not change revenues, but it is expected to save the firm $486,450.00 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40.00%.

d. If the project's cost of capital is 17.00%, what is the NPV of the project?

Reference no: EM132028575

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