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CMS Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $545,000 is estimated to result in
CMS Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $545,000 is estimated to result in $97,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value of $70,000. The press also requires an initial working capital of $21,000, along with an additional $3,000 in working capital for each succeeding years of project. The tax rate is 34%, and the company's required rate of return is 11%. Should the company buy the machine?
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