Please correct answer and don't used hand raiting Tanaka Machine Shop is considering a four-year project to improve its productionefficiency. Buying a new machine press for $425,000 is estimated to result in $169,000in annual pretax cost savings. The press falls in the MACRS five-year class, and it willhave a salvage value at the end of the project of $69,000. (MACRS schedule) The pressalso requires an initial investment in spare parts inventory of $28,000, along with anadditional $3,500 in inventory for each succeeding year of the project. The shop's taxrate is 23 percent and its discount rate is 10 percent. Calculate the NPV of this project.(Do not round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)NPVShould the company buy and install the machine press?O No○ Yes

The problem involves the determination of the NPV. Net Present Value or NPV is a financial metric…

Answered: Tanaka Machine Shop is considering a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?
Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
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Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $1,084,800 is estimated to result in $361,600 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $158,200. The press also requires an initial investment in spare parts inventory of $45,200, along with an additional $6,780 in inventory for each succeeding year of the project. If the shop's tax rate is 23 percent and its discount rate is 13 percent, what is the NPV for this project?
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