Geary machine shop is considering a four year project to improve its production efficiency. Buying a new machine press for $1,008,000 is estimated to result in $336,000 in annual pretax cost savings. The press falls in the MACRS five year class and it will have a salvage value at the end of the project of $147,000. The press also requires an initial investment in spare parts inventory of $42,000, along with an additional $6,300 inventory for each succeeding year of the project. Required: if the shops tax rate is 31 percent and it's discount rate is 12 percent, what is the NPV for this project? Do not round your intermediate calculations.

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
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Geary machine shop is considering a four year project to improve its production efficiency. Buying a new machine press for $1,008,000 is estimated to result in $336,000 in annual pretax cost savings. The press falls in the MACRS five year class and it will have a salvage value at the end of the project of $147,000. The press also requires an initial investment in spare parts inventory of $42,000, along with an additional $6,300 inventory for each succeeding year of the project. Required: if the shops tax rate is 31 percent and it's discount rate is 12 percent, what is the NPV for this project? Do not round your intermediate calculations.

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