Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $370,000 is estimated to result in $140,000 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 $62,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $10,000, along with an additional $1,500 in inventory for each succeeding year of the project. The shop’s tax rate is 25 percent and the project's required return is 10 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.
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $370,000 is estimated to result in $140,000 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 $62,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $10,000, along with an additional $1,500 in inventory for each succeeding year of the project. The shop’s tax rate is 25 percent and the project's required return is 10 percent. Calculate the
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Step by step
Solved in 2 steps
