Four-year project to improve its production efficiency

Assignment Help Financial Management

Reference no: EM131880114

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $488,000 is estimated to result in $187,000 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 $56,500. The press also requires an initial investment in spare parts inventory of $21,300, along with an additional $3,300 in inventory for each succeeding year of the project. The shop’s tax rate is 30 percent and its discount rate is 11 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: EM131880114

Questions Cloud

Interest income will you have to declare on tax return : You hold the bond for the entire year. Assume semiannual compounding. How much interest income will you have to declare on your tax return?

Calculate the expected present value of benefit : An insurance company provides the following benefits to three different policyholders, calculate the expected present value of benefit (B).

Find the project discount rate and discounted payback period : Find the Project Discount Rate, Discounted Payback Period, Average Accounting Return, Profitability Index.

Assuming all variables take on best possible value : What is project NPV in the best-case scenario, that is, assuming all variables take on the best possible value?

Four-year project to improve its production efficiency : CSM Machine Shop is considering a four-year project to improve its production efficiency. Calculate the NPV.

What is the horizon value of the tax shield at year two : What is the horizon value of the tax shield at year 2? What is the current value of the tax shield?

Seek funding at the lowest possible cost : Xavier Manufacturing and Zulu Products both seek funding at the lowest possible cost.

What rate of return would you have earned on your investment : Six years ago you bought a bond for $1,036. what rate of return would you have earned on your investment?

What is the annual depreciation expense : What are the cash flows for the years 1 through 19? What is the annual depreciation expense? What is the NPV of the new branch?

User Account

All Pages