#5 COST SAVINGS W/MACRS DEPRECIATION METHOD (3PTS) Tanaka Machine Shop is considering a 4 year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $160,000 in annual pretax cost savings. The press falls into the MACRS five-year asset class, and it will have a salvage value at the end of the project of $40,000. The press also required an initial investment in spare parts inventory of $20,000, along with an additionall $2,800 in inventory for each succeeding year of the project. The shop's tax rate 22% and the discount rate = 9%. Calculate the NPV and the IRR% of this project. MACRS Depreciation Schedule for 5 year Asset: Cost = $445,000 Year % Depr Asset Depreciation Accumulated Depr 1 20.0% 2 32.0% 3 19.2% 4 11.52% 5 11.52% 6 5.76% Salvage Value= 22 Book Value Original Cost-Accumulated Depr Book Value= After-Tax Salvage Value = SV + (BV-SV)(t) After-Tax Salvage Value= Income Statement Cost Savings Depreciation EBT Taxes Net Income OCF (Net Income + Depr) Year 1 Year 2 Year 31 Year 4 5. e it e t Project Cash Year 0 Yr1 Yr2 Yr3 Yr4 ar Flows OCF 98 Investment Salvage Value NWC TOTAL CF NPV= IRR = tornaval