Question
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $490,847 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 $490,847 is estimated to result in some amount of annual pretax cost savings. The press will have an aftertax salvage value at the end of the project of $86,695. The OCFs of the project during the 4 years are $175,493, $191,453, $170,805 and $167,265, respectively. The press also requires an initial investment in spare parts inventory of $25,940, along with an additional $3,284 in inventory for each succeeding year of the project. The shop's discount rate is 6 percent. What is the NPV for this project?
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