Question
Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $1,056,000 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 $1,056,000 is estimated to result in $352,000 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 $154,000. The press also requires an initial investment in spare parts inventory of $44,000, along with an additional $6,600 in inventory for each succeeding year of the project. |
If the shop's tax rate is 23 percent and its discount rate is 11 percent, what is the NPV for this project? |
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