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Q 13/14 are related witount excal 13. Cost-Cutting Proposals Starset Machine Shop is clsidering a 4-year project to improve its production efficiency. Buying a new
Q 13/14 are related witount excal
13. Cost-Cutting Proposals Starset Machine Shop is clsidering a 4-year project to improve its production efficiency. Buying a new machine press for $670,000 is estimated to result in $245,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $55,000. 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 shop's tax rate is 23 percent and the discount rate is 8 percent, should the company buy and install the machine press? 14. NPV and Bonus Depreciation In the previous problem, suppose the fixed asset actually qualifies for 100 percent bonus depreciation. All the other facts are the same. What is the new NPV Step by Step Solution
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