Four-year project to improve its production efficiency

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Reference no: EM132026979

Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $550,000 is estimated to result in $230,000 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 $93,000. The press also requires an initial investment in spare parts inventory of $28,000, along with an additional $3,300 in inventory for each succeeding year of the project. The shop’s tax rate is 34 percent and its discount rate is 9 percent. MACRS schedule Calculate the NPV of this project.

Reference no: EM132026979

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