Adding robotic paint sprayer to its production line

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Reference no: EM13941658

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $900,000, 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 $510,000. The MACRS rates for the first three years are 0.3333, 0.4445, 0.1481, and 0.0741. The machine would require an increase in net working capital (inventory) of $18,500. The sprayer would not change revenues, but it is expected to save the firm $439,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.

If the project's cost of capital is 11 %, what is the NPV of the project? Round your answer to the nearest dollar.

Reference no: EM13941658

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