Question
Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $768,000 is estimated to result in
Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $768,000 is estimated to result in $256,000 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 $112,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $4,800 in inventory for each succeeding year of the project. |
Required : |
If the shop's tax rate is 34 percent and its discount rate is 18 percent, what is the NPV for this project? (Do not round your intermediate calculations.) |
Could you explain in detail? thanks!
Year 1 2 3 Property Class Three-Year Five-Year 33.33% 20.00% 44.45 32.00 14.81 19.20 7.41 11.52 11.52 5.76 4 Seven-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 5 6 7 8Step by Step Solution
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