Reference no: EM131182616
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $950,000, and it would cost another $20,000 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 $602,000. The machine would require an increase in net working capital (inventory) of $10,000. The sprayer would not change revenues, but it is expected to save the firm $378,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.
A) What is the Year-0 net cash flow?
B) 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 $
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 11%, what is the NPV of the project?
Should the machine be purchased?
|
Capital structure-theory and taxes
: Capital Structure: Theory and Taxes. Consider two firms in the same industry that operate in frictionless markets. Both firms, DebtHungry and Ner-aBorrower, have identical net operating income of $240000 per year. The riskiness of each company's asse..
|
|
What is the operating cash flow under best-case
: Assume a project has a sales quantity of8,600 units, plus or minus 5 percent and a sales price of $69 a unit,plus or minus 1 percent. The expected variable cost per unit is $11?3 percent and the expected fixed costs are $290,000plus or minus 2 percen..
|
|
What is the short-term and long-term financial impact
: In setting up a union how you anyone go a bout getting this information: Financial Statements: What financial statements will you utilize in making your proposal, and how will you use these statements? Proposal Impact: What impact will your proposal ..
|
|
How much new long-term debt financing will be needed
: At year-end 2013, Wallace Landscaping’s total assets were $1.6 million and its accounts payable were $395,000. Sales, which in 2013 were $2.5 million, are expected to increase by 25% in 2014. Total assets and accounts payable are proportional to sale..
|
|
What is the additional year-three cash flow
: The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $950,000, and it would cost another $20,000 to install it. What are the net operating cash flows in Years 1, 2, and 3? What is the ..
|
|
Find the dollar-weighted annual rate of investment return
: ason's trust fund has a value of 100,000 on January 1st, 2014. On April 1st, 2014 10,000 is withdrawn from the fund, and immediately after this withdrawal the fund has a value of 95,000. On January 1st, 2015 the fund value is 115,000. find the time-w..
|
|
What is nominal dollar amount of your last withdrawal
: You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,150 per month in a stock account in real dollars and $540 per month in a bond account in real dollars. How much can you withdraw each month fro..
|
|
Using dividends and earnings model
: New Millennium Company stock sells at P/E ratio of 20.6 times earnings. It is expected to pay dividends of 2.19$ per share in each of the next 5 years and to generate an EPS of 5.23 $ in year 5. Using dividends - and earnings model and 11%discount ra..
|