Four-year project to improve its production efficiency

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Reference no: EM13907392

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $501,000 is estimated to result in $200,000 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 $63,000. The press also requires an initial investment in spare parts inventory of $22,600, along with an additional $4,600 in inventory for each succeeding year of the project. The shop’s tax rate is 34 percent and its discount rate is 12 percent. Requirement 1: Calculate the NPV. savings. The press falls in the MACRS five-year class

Reference no: EM13907392

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