Lowell Company is considering adding a robotic paint sprayer to the production line. The prayer's base price is $100,000, and it would cost another $10,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $60,000. The MACRS rates for the first three years are 33%, 45%, and 15%. The machine would require and, increase in net working capital of $5,000. The sprayer would not change revenues, but it is expected to save the firm $40,000 per year in before tax operating costs, mainly labor. Lowell's marginal tax rate (federal plus state) is 25%. If the project's cost of capital is 12%, What is the TOTAL FREE CASH FLOW FOR YEAR 3? Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value O $64,986 O $90,550 O $75,600 O $86,050

Lowell Company is considering adding a robotic paint sprayer to the production line. The prayer's base price is $100,000, and it would cost another $10,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $60,000. The MACRS rates for the first three years are 33%, 45%, and 15%. The machine would require and, increase in net working capital of $5,000. The sprayer would not change revenues, but it is expected to save the firm $40,000 per year in before tax operating costs, mainly labor. Lowell's marginal tax rate (federal plus state) is 25%. If the project's cost of capital is 12%, What is the TOTAL FREE CASH FLOW FOR YEAR 3? Free cash flow = Total Initial Investment + Total annual project CF + Total Salvage Value O $64,986 O $90,550 O $75,600 O $86,050

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Description: Lowell Company is considering adding a robotic paint sprayer to the production line. The prayer's base price is $100,000, and it would cost another $10,000 to install it. The machine falls into theMACRS 3-year class, and it would be sold after 3 yea

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 6P: New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its...

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