Initial investment in spare parts inventory

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Reference no: EM131309674

Massey 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. Refer to the MACRS schedule. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131309674

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