Question
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $520,000 is estimated to result
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $520,000 is estimated to result in $215,000 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 $87,000. The press also requires an initial investment in spare parts inventory of $25,000, along with an additional $3,000 in inventory for each succeeding year of the project. The shops tax rate is 34 percent and its discount rate is 10 percent.
Calculate the NPV of this project. |
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