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. What is the project's NPV?
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. What is the project's NPV?
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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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
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