Problem 9-23 Cost-Cutting Proposals [LO 2]

Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $399,000 is estimated to result in $146,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS schedule) and it will have a salvage value at the end of the project of $47,000. The press also requires an initial investment in spare parts inventory of $15,200, along with an additional $2,200 in inventory for each succeeding year of the project. The shops tax rate is 22 percent and its discount rate is 9 percent. Calculate the project's NPV.

Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Net Present Value