Four-year project to improve production efficiency

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Reference no: EM13880694

Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 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 $66,000. The press also requires an initial investment in spare parts inventory of $12,000, along with an additional $1,700 in inventory for each succeeding year of the project. The shop’s tax rate is 35 percent and its discount rate is 9 percent. Refer to Table 10.7.

Calculate the NPV of this project?

Should the company buy and install the machine press?

Reference no: EM13880694

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Four-year project to improve production efficiency : Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 in annual pretax cost savings. Calculate the NPV of this project? Should the ..

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