Four-year project to improve production efficiency

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Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $410,000 is estimated to result in $150,000 in annual pre-tax cost savings. The press falls into Class 8 for CCA purposes (CCA rate of 20 percent per year), and it will have a salvage value at the end of the project of $55,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $3,100 in inventory for each succeeding year of the project. If the shop’s tax rate is 35 percent and its discount rate is 9 percent.

Calculate the NPV of this project. (Do not round your intermediate calculations. Round the final answer to 2 decimal places.)

Reference no: EM131913361

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