Cost Cutting proposals Ex 2: Cost Cutting Proposals The Burgon company is considering a four-year project to improve its production efficiency. Buying a new machine press for $730,000 is estimated to result in $270,000 in annual pre-tax savings. The press falls in the MACRS five year class, and it will have a salvage value at the end of the project of $70,000. The press also requires an initial investment of $20,000 along with an additional $3,500 in inventory for each succeeding year of the project. If the shop's tax rate is 35 percent and its discount rate is 8 percent, should Massey buy and install the machine press? In order to get depreciation, we need to work with the following values: Year MACRS % 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76% Total 100.00%