User Account

All Pages

Explain the new-project analysis

Assignment Help Finance Basics
Reference no: EM133073511

eBook Problem Walk-Through

New-Project Analysis

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, and it would cost another $16,500 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 $632,000. The machine would require an increase in net working capital (inventory) of $20,000. The sprayer would not change revenues, but it is expected to save the firm $448,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%. Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations.

Answer the following:

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 after-tax salvage and the return of working capital)?

d. If the project's cost of capital is 13 %, what is the NPV of the project?

e. Should the machine be purchased?

Reference no: EM133073511

Questions Cloud

Fnd the optimal solution : In the United Copiers service center model, we assumed that the potential locations of service centers are the same as existing customer locations. Change the m
Amount in interest expense : What amount in interest expense did InterTech record for the June 30th payment of this year?
Compute the cost of each quality category : For 2020, compute the cost of each quality category and the total cost of quality for Mont Corp assuming that: the alternative inspection method is adopted
Calculate the irr that the firm earns on the product : Calculate the IRR that the firm earns on the product and comment on whether it is a good investment.
Explain the new-project analysis : The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $830,000, and it would cost another $16,5
What is the demand of the process : At SLC Barber Shop, the average service time is 30 minutes, with a standard deviation of service times being 45 minutes. What is the demand of the process
Calculate the residual income for each division : Bryson Ltd specialises in golf equipment and has two divisions - Golf Clubs Division and Golf Ball Division. Calculate the residual income for each division
Identify the type i and type ii errors : The accounts of 4,500 credit card customers out of a sample of 40,000 that were reviewed did not perform satisfactorily. The credit scores assigned to these app
Discuss quantitative easing as a monetary policy tool : Discuss quantitative easing as a monetary policy tool with reference to Canada. How does this affect money supply

Reviews

Write a Review

Finance Basics Questions & Answers

  How much each category in the accounting equation increases

The following transactions occur for the Wolfpack Shoe Company during the month of June: Provide services to customers for $25,000 and receive cash.

  What are the six planning tools and techniques

What are the six planning tools and techniques? Using an example from your experience (as a student or at work)

  What is the average daily float

The BDF Co. receives five cheques per month, each month. The payments and clearing times are: $4,000, two days; $6,000, two days; $3,000, five days; $8,000, thr

  What should be the market price of these bonds

General Electric made a coupon payment yesterday on its 6.75% bonds that mature in 8.5 years. If required return on these bonds is 8% APR, what should be the market price of these bonds?

  Effect of diversification on portfolio

Where are the dependent and independant variables in each topic? Effect of correlation on diversificatio

  Discuss the three types of investigations

In your response, discuss the three types of investigations generally made by host state courts.

  Determine the payback period for the project

A project requires an initial outlay of $100,000, and is expected to generate annual net cash inflows of $28,000 for the next 5 years. Determine the payback period for the project.

  What is the weighted average flotation cost

The flotation costs are 11 percent for common stock, 10 percent for preferred stock, and 7 percent for debt. The corporate tax rate is 37 percent. What is the weighted average flotation cost?

  Indicate in which part of the statement of cash flows each

indicate in which part of the statement of cash flows each item would appear operating activities o investing

  Describe the standard of care to protect

Briefly describe the standard of care to protect others from harm for each of the following liability situations: a. Property owners

  What is the current price of a stock

The stock will pay out dividends over the next 3 years of $1.35, $1.90, and $2.20, respectively. The price of the stock will be $56.71 at time 3.

  Define cash method and accural method

Company X has reported its income under the cash method since its formation in 2009. The IRS requires X to change to the accrual method beginning in 2016.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd