Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $400,000 is estimated to result in $155,000 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 $68,000. The press also requires an initial investment in spare parts inventory of $13,000, along with an additional $1,800 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and the project's required return is 10 percent. What is the NPV of this project?
Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $400,000 is estimated to result in $155,000 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 $68,000. The press also requires an initial investment in spare parts inventory of $13,000, along with an additional $1,800 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and the project's required return is 10 percent. What is the NPV of this project?
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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Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $400,000 is estimated to result in $155,000 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 $68,000. The press also requires an initial investment in spare parts inventory of $13,000, along with an additional $1,800 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and the project's required return is 10 percent. What is the
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