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Should the company buy and install the machine press

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Question - Caradoc Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $429,000 is estimated to result in $169,000 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 $56,900. The press also requires an initial investment in spare parts inventory of $39,000, along with an additional $5,000 in inventory for each succeeding year of the project. If the shop's tax rate is 35% and its discount rate is 9%.

Required -

Calculate the NPV of this project.

Should the company buy and install the machine press?

Reference no: EM132824891

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