Wonka Candy Inc. would like to buy a new machine that would automatically dip chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs $100,000. The manufacturer estimates that the machine would be usable for 12 years, but, at the end of the sixth year, would require the replacement of several key parts that would cost $10,000, including installation. After 12 years, the machine could be sold for about $7,500. The company estimates that the cost to operate the machine will be only $10,000 per year. The present method of dipping chocolates costs $31,000 per year. In addition to reducing costs, the new machine will increase production by 6,000 boxes of chocolates per year. The company realizes a contribution margin of $1.50 per box. A 20% rate of return is required on all investments. Required: 1. What are the net annual cash inflows that will be provided by the new dipping machine? 2. Compute the new machine's net present value. Use the incremental cost approach, and round all dollar amounts to the nearest whole dollar.

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 $21,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $591,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $13,500. The sprayer would not change revenues, but it is expected to save the firm $316,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.   What are the net operating cash flows in Years 1, 2, and 3?   Year 1: $   Year 2: $   Year 3: $     What is the additional Year-3 cash flow (i.e, the after-tax…

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $920,000, and it would cost another $20,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $500,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $304,000 per year in before-tax operating costs, mainly labor. Campbell’s marginal tax rate is 25%. a. What is the Year-0 cash flow? b. What are the cash flows in Years 1, 2, and 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 12%, what is the NPV?

Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6,000,000 to buy the machine and $20,000 to have it delivered and installed Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $3,000,000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 20%. What are the incremental free cash flows associated with the new machine in year 0? OA-$6,000,000 OB. -$8,118,000 C. $1,003,333 OD. -$9.020,000

Emperor's Clothes Fashions can invest $5 million in a new plant for producing invisible makeup. The plant has an expected life of 5 years, and expected sales are 6 million jars of makeup a year. Fixed costs are $3.8 million a year, and variable costs are $2.50 per jar. The product will be priced at $3.90 per jar. The plant will be depreciated straight-line over 5 years to a salvage value of zero. The opportunity cost of capital is 10%, and the tax rate is 30%. a. What is project NPV under these base-case assumptions? Note: Do not round intermediate calculations. Enter your answer in millions, rounded to 2 decimal places. b. What is NPV if variable costs turn out to be $2.80 per jar? Note: Do not round intermediate calculations. Enter your answer in millions, rounded to 2 decimal places. c. What is NPV if fixed costs turn out to be $3.3 million per year? Note: Do not round intermediate calculations. Enter your answer in millions, rounded to 2 decimal places. d. At what price per jar…

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $800,000, and it would cost another $17,000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $595,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $18,500. The sprayer would not change revenues, but it is expected to save the firm $391,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 25%. (Ignore the half-year convention for the straight-line method.) Cash outflows, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest dollar.   What is the Year-0 net cash flow? $   What are the net operating cash flows in Years 1, 2, and 3?   Year 1: $   Year 2: $   Year 3: $     What is the additional Year-3…

Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of five years. It can be sold now for $57,000. Variable manufacturing costs are $47,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years.    Machine A Machine B Purchase price $ 118,000 $ 132,000 Variable manufacturing costs per year 20,000 14,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A.(b) Compute the income increase or decrease from replacing the old machine with Machine B.(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase?