Question
Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $423,000 is estimated to result in
Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $423,000 is estimated to result in $163,000 in annual pre-tax cost savings. The press falls into Class 8 for CCA purposes (CCA rate of 20% per year), and it will have a salvage value at the end of the project of $56,300. The press also requires an initial investment in spare parts inventory of $33,000, along with an additional $4,400 in inventory for each succeeding year of the project. If the shop's tax rate is 35% and its discount rate is 9%.
Calculate the NPV of this project.(Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
NPV$
Should the company buy and install the machine press?
multiple choice
- Yes
- No
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started