Project to improve production efficiency-annual pretax cost

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Reference no: EM13913386

Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $480,000 is estimated to result in $195,000 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 $81,000. The press also requires an initial investment in spare parts inventory of $21,000, along with an additional $2,600 in inventory for each succeeding year of the project. The shop’s tax rate is 30 percent and its discount rate is 8 percent. 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.) NPV $ Should the company buy and install the machine press? Yes No

Reference no: EM13913386

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