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The Factory is considering a three - year project to improve its production efficiency. Buying a new machine for $ 4 0 0 , 0
The Factory is considering a threeyear project to improve its production efficiency. Buying a new machine for $ is estimated to result in $ in annual pretax cost savings. The press falls in the MACRS fiveyear class, and it will have a pretax salvage value at the end of the project of $ The MACRS rates are and for Years to respectively. Ignore bonus depreciation. The press also requires an initial investment in inventory of $ along with an additional $ in inventory for each succeeding year of the project. The inventory will return to its original level when the project ends. The tax rate is percent and its discount rate is percent. Should the firm buy and install the machine? Why or why not?
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