Cost-cutting proposals-calculate the net present value

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Reference no: EM131561658

Cost-Cutting Proposals

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $497,000 is estimated to result in $196,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $61,000. The press also requires an initial investment in spare parts inventory of $22,200, along with an additional $4,200 in inventory for each succeeding year of the project. The shop’s tax rate is 34 percent and its discount rate is 12 percent. Calculate the NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net present value

Reference no: EM131561658

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