Four-year project to improve its production efficiency

Assignment Help Financial Management
Reference no: EM131530517

Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $470,000 is estimated to result in $190,000 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 $80,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $2,500 in inventory for each succeeding year of the project. The shop’s tax rate is 35 percent and its discount rate is 9 percent.

Calculate the NPV for this project. (Round answer to two decimal places)

Reference no: EM131530517

Questions Cloud

Explain effect of increase in real gdp growth on ur : With its tradition of a job for life for most citizens, Japan once had a much lower unemployment rate than that of the United States; from 1960 to 1995.
Calculate and interpret net present value method : Calculate and interpret net present value (NPV) method for investment decisions with suitable example.
Incremental analysis : Incremental Analysis: If production does increase dramatically after their presentation on Shark Tank, the Lees will need more space for production.
Describe benefits of a grant-based program for sports league : Describe the benefits of a grant-based program for the sports league. Provide at least three references to support your claims.
Four-year project to improve its production efficiency : Purple Haze Machine Shop is considering a four-year project to improve its production efficiency.
Preferred stock valuation and intrinsic value : What is the firm's intrinsic value today, P0? What is the required rate of return?
Is inflation imposing a net cost on the economy : In the following examples, is inflation creating winners and losers at no net cost to the economy or is inflation imposing a net cost on the economy?
Determine the present worth of geometric gradient series : Determine the present worth of a geometric gradient series with a cash flow of $50,000 in year 1 and increases of 6% each year through year 8.
Explain different operations management principles : Explain different operations management principles and techniques that can make businesses more profitable today.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the market value of the firm equity and debt

Sunburn Sunscreen has a zero coupon bond issue outstanding with $20,000 face value that matures in one year. The current market value of the firm’s assets is $20,900. The standard deviation of the return on the firm’s assets is 26% per year, and the ..

  What is the project NPV and what is its IRR

Salevsky Manufacturing Company is considering the purchase of a new machine for $250,000 that will reduce manufacturing costs by $90,000 annually. Salevsky will use the 3-year MACRS accelerated method to depreciate the machine, and it expects to sell..

  What are total contribution margin and total product margin

What are the total contribution margin and and total product margin for a Healthchek visit?

  Cypress corporations alternative minimum tax liability

Cypress Corporation has regular taxable income of $170,000 (assume annual gross receipts are greater than $5 million) and a regular tax liability of $49,550 for 2014. The corporation also has tax preference items amounting to $105,000. Calculate Cypr..

  Dollar return on this investment over the past year

Suppose you bought a 6 percent coupon bond one year ago for $950. The bond sells for $995 today. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? What was your total nominal rate of return on this..

  Which firm is subject to higher degree of economic exposure

The parent of each firm subsidizes its respective research and development centre on an annual basis. Which firm is subject to a higher degree of economic exposure? Explain.

  Corporation is fast-growing supplier of office products

Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years,

  Modigliani and miller dividend policy

Some have argued that, if the firm issues an even higher dividend than expected, it must mean they do not have many profitable, new projects to invest in. Thus the stock price should fall. How would you respond and why?

  How much should he be willing to pay for the stock

Ken Investor expected the Widget Corporation to pay dividends of $4, $4.5, and $5 over the next three years. He also expects that the stock will have a price at the end of a three- year holding period of $250 per share. If Ken requires a 20% return o..

  Managements expectation that the local foreign currency

A short-term financial decision based on an MNC management's expectation that the local foreign currency will appreciate may be A. increasing local customers' accounts receivable and increasing local notes payable. B. increasing local accounts receiv..

  Calculating interest and principal portions of first payment

A buyer has just purchased a home for $250,000. The buyer made a 20% down-payment and secured a note for the remainder at an interest rate of 7 percent for 25 years. Calculate the principal balance at the end of the first month by calculating the int..

  Calculate the size of the fund at the end of the four years

our company has decided to set up a welfare fund with an initial payment of Ghc 275m which is compounded six-monthly over a four-year period at 20% per annum. Calculate the Size of the fund at the end of the four years. An entrepreneur purchased a pi..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd