Now discount all cash flows to get the NPV

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Reference no: EM131983812

Disraeli Gears Inc. manufactures latke-shaped gears. The company is considering the purchase of a new machine press for $547,200. The press has a four-your life and is estimated to result in $182,400 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 $79,800. The press also requires an initial investment of $22,800 in spare parts for inventory. An additional $3,420 in inventory will be required for each succeeding year of the project. All investments in inventory will be recovered at the end of the project. If the shop's tax rate is 31 percent and its discount rate is 11 percent, what is the NPV for this project? (Do not round your intermediate calculations.) HINT: Calculate the depreciation for each year and use it to get the after tax-salvage value. Next, calculate OCF using the annual depreciation and then construct CFFA for each year. Now discount all cash flows to get the NPV.

Reference no: EM131983812

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