Question
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $499,000 is estimated to result in
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $499,000 is estimated to result in $198,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $62,000. The press also requires an initial investment in spare parts inventory of $22,400, along with an additional $4,400 in inventory for each succeeding year of the project. The shops tax rate is 40 percent and its discount rate is 11 percent. |
Required: |
Calculate the depreciation for each year of the project. (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).) |
Depreciation | |
Year 1 | $ |
Year 2 | $ |
Year 3 | $ |
Year 4 | $ |
Calculate the aftertax salvage value for the equipment at the end of the project. (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).) |
Aftertax salvage value | $ |
Calculate the operating cash flow for each year of the project. (Do not round intermediate calculations.Round your answer to the nearest whole number (e.g., 32).) |
OCF | |
Year 1 | $ |
Year 2 | $ |
Year 3 | $ |
Year 4 | $ |
Calculate the NPV. (Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
Net present value | $ |
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