Question
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $440,000 is estimated to result in
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $440,000 is estimated to result in $178,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $72,000. The press also requires an initial investment in spare parts inventory of $31,000, along with an additional $3,650 in inventory for each succeeding year of the project. The shops tax rate is 21 percent and its discount rate is 12 percent. |
Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Should the company buy and install the machine press? |
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