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 14P

See similar textbooks

Similar questions

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.
Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
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 $163,000 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 $63,000. (MACRS schedule) The press also requires an initial investment in spare parts inventory of $26,000, along with an additional $3,400 in inventory for each succeeding year of the project. The shop's tax rate is 21 percent and its discount rate is 8 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Should the company buy and install the machine press? ○ No Yes
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $395,000 is estimated to result in $151,000 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 $51,000. (MACRS schedule) The press also requires an initial investment in spare parts inventory of $22,000, along with an additional $3,200 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and its discount rate is 9 percent. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) In excel, please!
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $429,000 is estimated to result in $161,000 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 $62,000. The press also requires an initial investment in spare parts inventory of $16,700. along with an additional $3,700 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 9 percent. Calculate the project's NPV.
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $429,000 is estimated to result in $161,000 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 $62,000. The press also requires an initial investment in spare parts inventory of $16,700. along with an additional $3,700 in inventory for each succeeding year of the project. The shop's tax rate is 22 percent and its discount rate is 9 percent. Calculate the project's NPV.
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $430,000 is estimated to result in $170,000 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 $73,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $16,000, along with an additional $2,100 in inventory for each succeeding year of the project. The shop's tax rate is 24 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. Answer is complete but not entirely correct. $ 67,994.970 NPV
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $510,000 is estimated to result in $210,000 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 $86,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $24,000, along with an additional $2,900 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and the project's required return is 8 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. d NPV ces
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?
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 $500,000 is estimated to result in $205,000 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 $84,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $23,000, along with an additional $ 2,800 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and the project's required return is 9 percent. Calculate the NPV of this project.

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Fundamentals Of Financial Management, Concise Edi…

Finance

ISBN:

9781337902571

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Fundamentals Of Financial Management, Concise Edi…

Finance

ISBN:

9781337902571

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Excel Applications for Accounting Principles

Accounting

ISBN:

9781111581565

Author:

Gaylord N. Smith

Publisher:

Cengage Learning

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS