Four-year project to improve its production efficiency

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Reference no: EM131527652

Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $730,000 is estimated to result in $270,000 in annual pretax cost savings. The press falls in the MACRS five-year class,and it will have a salvage value at the end of the project of $70,000. The press alsorequires an initial investment in spare parts inventory of $20,000, along with anadditional $3,500 in inventory for each succeeding year of the project. If the shop’s taxrate is 35 percent and its discount rate is 8 percent, should Massey buy and install themachine press? (Assume that dNWC will be fully recovered in the last year of theproject.) need the answer written out (NOT ON EXCEL) please.

Reference no: EM131527652

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