Question
Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $465,000 is estimated to result in
Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $465,000 is estimated to result in $193,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $73,000. The press also requires an initial investment in spare parts inventory of $36,000, along with an additional $3,900 in inventory for each succeeding year of the project. The shops tax rate is 21 percent and its discount rate is 12 percent. (MACRS schedule)
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