Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $450,000 is estimated to result in $184,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $74,000. The press also requires an initial investment in spare parts inventory of $33,000, along with an additional $3,750 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and its discount rate 10 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $450,000 is estimated to result in $184,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $74,000. The press also requires an initial investment in spare parts inventory of $33,000, along with an additional $3,750 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and its discount rate 10 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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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Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $395,000 is estimated to result in $151,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $51,000. The press also requires an initial investment in spare parts inventory of $22,000, along with an additional $3,200 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and its discount rate is 9 percent. (MACRS schedule) Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $421,000 is estimated to result in $161,000 in annual pre-tax cost savings. The press falls into Class 8 for CCA purposes (CCA rate of 20% per year), and it will have a salvage value at the end of the project of $56,100. The press also requires an initial investment in spare parts inventory of $31,000, along with an additional $4,200 in inventory for each succeeding year of the project. If the shop’s tax rate is 35% and its discount rate is 9%. Calculate the NPV of this project. Round the final answer to 2 decimal places
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $160,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $40,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $2,800 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 9 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Should the company buy and install the machine press? Yes ........... No
Holmes Manufacturing is considering a new machine that costs $290,000 and would reduce pretax manufacturing costs by $90,000 annually. The new machine will be fully depreciated at the time of purchase. Management thinks the machine would have a value of $24,000 at the end of its 5-year operating life. Net operating working capital would increase by $28,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes's marginal tax rate is 25%, and a 13% WACC is appropriate for the project. a. Calculate the project's NPV. Negative value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest cent. $ Calculate the project's IRR. Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the project's MIRR. Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the project's payback. Do not round intermediate calculations. Round…
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $429,000 is estimated to result in $161,000 in annual pretax cost savings. The press falls in the MACRS five- year class (MACRS schedule) and it will have a salvage value at the end of the project of $62,000. The press also requires an initial investment in spare parts inventory of $16,700. along with an additional $3,700 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 9 percent. Calculate the project's NPV.
Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $480,000 is estimated to result in $195,000 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 $81,000. The press also requires an initial investment in spare parts inventory of $21,000, along with an additional $2,600 in inventory for each succeeding year of the project. The shop's tax rate is 30 percent and its discount rate is 8 percent. MACRS schedule : 1st year = 20% 2nd year = 32% 3rd year = 19.2% 4th year = 11.52% 5th year = 5.76%
Moose Pastures Inc. is considering a seven-year project to improve its production efficiency. Buying a new assembly machine for $708, 000 is estimated to result in $213,000 in annual pre-tax cash flows. The machine has a CCA rate of 30% per year, and it will have a salvage value of $70,000 at the end of the project. The machine also requires an initial investment in inventory of $20, 000 (in year zero), which will be recovered at the end of the project (in year 7). If the tax rate is 40% and the discount rate is 10%, what is the NPV of the machine purchase? (Assume the CCA pool remains open and that there are no capital gains/losses.) Correct answer is $132, 337. (My question) Hi I am confused on how it got 132, 337. I know there's a formula but can you walk me through the steps to get this correct answer?
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $510,000 is estimated to result in $210,000 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 $86,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $24,000, along with an additional $2,900 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and the project's required return is 8 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. d NPV ces
Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $424,000 is estimated to result in $164,000 in annual pre-tax cost savings. The press falls into Class 8 for CCA purposes (CCA rate of 20% per year), and it will have a salvage value at the end of the project of $56,400. The press also requires an initial investment in spare parts inventory of $34,000, along with an additional $4,500 in inventory for each succeeding year of the project. If the shop's tax rate is 35% and its discount rate is 9%. Calculate the NPV of this project. (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV Should the company buy and install the machine press? Yes No
A new production system for a factory is to be purchased and installed for $135331 . This system will save approximately 300,000kWh of electric power each year for a 6-year period. Assume the cost of electricity is $0.10 per kWh , and factory MARR is 15% per year, and the salvage value of the system will be $8662 at year 6 . Using the PW method to analyzes if this investment is economically justified A- calculate the PW of the above investment and insert the result below. _______________________
Give me correct answer and explanation.jit
XYZ Enterprise is considering an investment in a new packaging, which could reduce labour costs by 30%. XYZ Enterprise has an annual labour cost of $450,000. The new packaging would cost $725,000 and would replace the old machine that is currently used. The straight line depreciation rate for the new machine is 20% of the purchase price. The new machine would be used for 6 years, with an expected salvage value of $60,000 at the end of its useful life. XYZ Enterprise could obtain a long-term loan at the Canadian Bank and would pay approximately $10,000 interest per year. The old machine was acquired 2 years ago at a cost of $850,000 and is being depreciated over 8 years using the straight-line method. It was expected that after 8 years its salvage value would be zero, but it can be sold now for $212,500. The company ’s tax rate is 35% and its required before-tax return on all investments is 12%. A. Determine the initial investment on the new machine. B. Determine the annual cash flow…

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