Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $425,000 is estimated to result in $159,000 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 $60,000. The press also requires an initial investment in spare parts inventory of $16,500, along with an additional $3,500 in inventory for each succeeding year of the project. The shop's tax rate is 25 percent and its discount rate is 12 percent. Calculate the project's NPV. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Net present value
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $425,000 is estimated to result in $159,000 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 $60,000. The press also requires an initial investment in spare parts inventory of $16,500, along with an additional $3,500 in inventory for each succeeding year of the project. The shop's tax rate is 25 percent and its discount rate is 12 percent. Calculate the project's NPV. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Net present value
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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Transcribed Image Text:Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for
$425,000 is estimated to result in $159,000 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 $60,000. The press also requires an initial
investment in spare parts inventory of $16,500, along with an additional $3,500 in inventory for each succeeding year of the
project. The shop's tax rate is 25 percent and its discount rate is 12 percent. Calculate the project's NPV.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Net present value
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