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CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $497,000 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 $497,000 is estimated to result in $196,000 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 $61,000. The press also requires an initial investment in spare parts inventory of $22,200, along with an additional $4,200 in inventory for each succeeding year of the project. The shops tax rate is 34 percent and its discount rate is 12 percent.

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MACRS table

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Property Class Year 3-Year 5-Year 7-Year 2000% 32.00 19.20 11.52 11.52 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 2 3 4 33.33% 44.45 14.81 7.41 5.76 6 7 8

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