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Should it buy and install the machine press

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Question - Normrac Corp is considering a five- year project to improve its production efficiency. Buying a new machine press for $560,000 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% 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 projects. If the company's tax rate is 35% and its discount rate is 9%, should it buy and install the machine press? Show your work and explain why.

Reference no: EM133087842

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