Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $415,000 is estimated to result in $154,000 annual pretax cost savings. The press qualifies for 100 percent bonus depreciation and will have a salvage value at the end of the project of $55,000. The press also requires initial investment in spare parts inventory of $16,000, along with an additional $3,000 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.
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $415,000 is estimated to result in $154,000 annual pretax cost savings. The press qualifies for 100 percent bonus depreciation and will have a salvage value at the end of the project of $55,000. The press also requires initial investment in spare parts inventory of $16,000, along with an additional $3,000 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.
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 $415,000 is estimated to result in $154,000 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 $55,000. The press also requires an
initial investment in spare parts inventory of $16,000, along with an additional $3,000 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.
NPV
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