Cash flows estimation and capital budgeting:
You are the head of finance department in XYZ Company. You are
considering adding a new machine to your production facility. The
new machine’s base price is $10,000.00, and it would cost another
$2,280.00 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 three years for
$1,850.00. The machine would require an increase in net working
capital (inventory) of $830.00. The new machine would not change
revenues, but it is expected to save the firm $29,155.00 per year
in before-tax operating costs, mainly labor. XYZ's marginal tax
rate is 34.00%.
If the project's cost of capital is 12.65%, what is the NPV of the
project? What is the initial cash outlay? What is the free cash
flow for year 1? What is the additional Year-3 cash flow (i.e, the
after-tax salvage and the return of working capital – also called
terminal value)?
Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company....
Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machine’s base price is $10,100.00, and it would cost another $3,280.00 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 three years for $2,150.00. The machine would require an increase in net...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $810,000, and it would cost another $23,000 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 $628,000. The machine would require an increase in net working capital (inventory) of $19,500. The sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $810,000, and it would cost another $23,000 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 $628,000. The machine would require an increase in net working capital (inventory) of $19,500. The sprayer would not change revenues, but...
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $890,000, and it would cost another $16,000 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 $662,000. The machine would require an increase in net working capital (inventory) of $15,000. The sprayer would not change revenues, but it is...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,130,000, and it would cost another $16,000 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 $589,000. The machine would require an increase in net working capital (inventory) of $14,500. The sprayer would not change revenues, but...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $820,000, and it would cost another $21,000 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 $636,000. The machine would require an increase in net working capital (inventory) of $12,500. The sprayer would not change revenues, but...
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $990,000, 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 $623,000. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is...
Problem 11-06 New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,180,000, and it would cost another $24,000 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 $670,000. The machine would require an increase in net working capital (inventory) of $13,000. The sprayer would not change...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $930,000, and it would cost another $22,000 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 $502,000. The machine would require an increase in net working capital (inventory) of $16,500. The sprayer would not change revenues, but...
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,030,000, and it would cost another $22,500 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 $631,000. The machine would require an increase in net working capital (inventory) of $20,000. The sprayer would not change revenues, but it is...