Question
CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $427,000 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 $427,000 is estimated to result in $160,000 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 $16,600, along with an additional $3,600 in inventory for each succeeding year of the project. The shops tax rate is 21 percent and its discount rate is 8 percent. Calculate the depreciation for each year of the project. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Calculate the aftertax salvage value for the equipment at the end of the project. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Calculate the operating cash flow for each year of the project. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Calculate the NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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