Question
Geary Machine Shop is considering a four-year project to improve its production eciency. Buying a new machine press for $902,400 is estimated to result in
Geary Machine Shop is considering a four-year project to improve its production eciency. Buying a new machine press for $902,400 is estimated to result in $300,800 in annual pretax cost savings. The press falls in the MACRS ve-year class (MACRS Table), and it will have a salvage value at the end of the project of $131,600. The press also requires an initial investment in spare parts inventory of $37,600, along with an additional $5,640 in inventory for each succeeding year of the project. Required : If the shop's tax rate is 32 percent and its discount rate is 18 percent, what is the NPV for this project? Show calculator work.
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