Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $470,000 is estimated to result in $190,000 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 $80,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $2,500 in inventory for each succeeding year of the project. If the shops tax rate is 35% and its discount rate is 9%, should the company buy and install the machine press?

Req Rate Revenue t=1 Revenue t=2 Revenue t=3 Revenue t=4 investment Final book value FA Sale value NWC req't Costs Tax rate Depr. years \begin{tabular}{l|l|l} \hline Project inR & & function: 1 AR \\ \hline Project NPV & function: NPV \\ \hline Accept/Reject & \\ \hline \end{tabular} After Tax Salvage MACRS Depreciation Table Five-Year Sale Price Cost Basis less: Accumulated Depreciation Net Book Value Taxable Gain Tax After Tax Salvage