Question
Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in
Tanaka Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $181,000 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 $73,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $3,700 in inventory for each succeeding year of the project. The shops tax rate is 22 percent and its discount rate is 11 percent.(MACRS schedule)Calculate the NPV of this project.
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