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
Problem 1PS
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Transcribed Image Text:Masters Machine Shop is considering a four-year project to improve its
production efficiency. Buying a new machine press for $844,800 is estimated
to result in $281,600 in annual pretax cost savings. The press falls in the
MACRS five-year class (MACRS Table), and it will have a salvage value at the
end of the project of $123,200. The press also requires an initial investment in
spare parts inventory of $35,200, along with an additional $5,280 in inventory
for each succeeding year of the project.
If the shop's tax rate is 25 percent and its discount rate is 12 percent, what is
the NPV for this project?
Multiple Choice
$-924.19
$1,690.87
$-92,906.13
○ $-970.40
○ $-877.99
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