CSM Machine shop is considering a four-year project to improve its production efficency. Buying a new machine press for $413,000 is estimated to result in $153,000 in annual pretax cost savings. The press is eligible for 100 percent bonus depreciation and it will have a salvage value at the end of the project $54,000. The press also requires an initial investment in spare parts inventory of $15,900, along with an additional $2,900 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and its discount rate is 11 percent. Calculate the project's NPV.
CSM Machine shop is considering a four-year project to improve its production efficency. Buying a new machine press for $413,000 is estimated to result in $153,000 in annual pretax cost savings. The press is eligible for 100 percent bonus depreciation and it will have a salvage value at the end of the project $54,000. The press also requires an initial investment in spare parts inventory of $15,900, along with an additional $2,900 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and its discount rate is 11 percent. Calculate the project's NPV.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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CSM Machine shop is considering a four-year project to improve its production efficency. Buying a new machine press for $413,000 is estimated to result in $153,000 in annual pretax cost savings. The press is eligible for 100 percent bonus
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