- +1-530-264-8006
- info@tutorsglobe.com

Macrs rates of campbell company

**Problem1.** The Campbell Company is considering adding the robotic paint sprayer to its production line. The sprayer%u2019s base price is $1,080,000, and it would cost another $22,500 to inaugurate it. The machine falls in the MACRS 3-year class, and it would be sold out after 3 years for $605,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. The machine would need an increase in net working capital (inventory) of $15,500. The sprayer wouldn’t change revenues, but it is anticipated to save the firm $380,000 per year in before-tax operating costs, mainly labour. Campbell%u2019s marginal tax rate is 35%.

a. What is Year 0 net cash flow?

b. What are net operating cash flows in Years 1, 2, and 3?

c. What is additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)?

d. Based on your IRR analysis, if the project%u2019s cost of capital is 12%, should the machine be bought?

18,76,764

Questions

Asked

21,311

Experts

9,67,568

Questions

Answered

Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!

Submit Assignment2015 © Tutors Globe. All rights reserved.

## Q : Current risk-free rate-after-tax cost

Evaluate the after-tax cost of a 25 million debt issue that Pullman Mfg Corp (40% marginal tax rate (is planning to place privately with a large insurance company. This long term issue will yield 9 3/8% to the insurance company. Use 9.375% for Kd.