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Ch. 8 - Problems Problem 8-11 Cost-Cutting Proposals 10 points Blue Line Machine Shop is considering a four year project to improve its production efficiency
Ch. 8 - Problems Problem 8-11 Cost-Cutting Proposals 10 points Blue Line Machine Shop is considering a four year project to improve its production efficiency Buying a new machine press for $490,000 is estimated to result in $200,000 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 $82,000. The press also requires an initial investment in spare parts inventory of $22,000, along with an additional $2.700 in inventory for each succeeding year of the project. The shop's tax rate is 34 percent and the project's required return is 10 percent. Refer to Table 8.3. eBook Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, ... 3216.) NPV Should the company buy and install the machine press? References Yes O No
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