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Question: the campbell company is considering adding a robotic paint sprayer...

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The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $880,000, and it would cost another $18,500 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 $625,000. The machine would require an increase in net working capital (inventory) of $12,000. The sprayer would not change revenues, but it is expected to save the firm $389,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.

  1. What is the Year 0 net cash flow?
    $



  2. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.
    Year 1 $
    Year 2 $
    Year 3 $

  3. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.
    $



  4. If the project's cost of capital is 12 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
    $

    Should the machine be purchased?
    -Select-YesNoItem 7
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