Should the company buy and install the machine press

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Reference no: EM13918097

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $489,000 is estimated to result in $188,000 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 $57,000. The press also requires an initial investment in spare parts inventory of $21,400, along with an additional $3,400 in inventory for each succeeding year of the project. The shop’s tax rate is 30 percent and its discount rate is 12 percent.

Requirement 1: Calculate the NPV. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Net present value $

Requirement 2: Should the company buy and install the machine press? Yes or No

Reference no: EM13918097

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