Geary Machine Shop is considering a four-year project to improve its production

Question

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $1,008,000 is estimated to result in $336,000 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 $147,000. The press also requires an initial investment in spare parts inventory of $42,000, along with an additional $6,300 in inventory for each succeeding year of the project.

If the shop's tax rate is 32 percent and its discount rate is 17 percent, what is the NPV for this project?

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $1,008,000 is estimated to result in $336,000 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 $147,000. The press also requires an initial investment in spare parts inventory of $42,000, along with an additional $6,300 in inventory for each succeeding year of the project.

Explanation / Answer

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.