Hello Bartelby Team,I need help with the attached question. Thanks so much! Tanaka Machine Shop is considering a 4-year project to improve its productionefficiency. Buying a new machine press for $395,000 is estimated to result in $151,000 inannual pretax cost savings. The press falls in the 5-year MACRS class, and it will have asalvage value at the end of the project of $51,000. The press also requires an initialinvestment in spare parts inventory of $22,000, along with an additional $3,200 ininventory for each succeeding year of the project. The shop's tax rate is 22 percent andits discount rate is 9 percent. (MACRS schedule) Calculate the NPV of this project. (Donot round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)NPVShould the company buy and install the machine press?YesO No

concept. Net Present Value (NPV). It is a capital budgeting technique used for making investment…

Answered: Tanaka Machine Shop is considering a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $181,000 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 $73,000. The press also requires an initial investment in spare parts inventory of $32,000, 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 11 percent. (MACRS schedule) Calculate the NPV of this project.
Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $181,000 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 $73,000. The press also requires an initial investment in spare parts inventory of $32,000, 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 11 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.) NPV Should the company buy and install the machine press? No Yes
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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