Should the company undertake the project

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American Analytics is considering a four-year project to improve its production efficiency. Buying a new machine press for $600,000 is estimated to result in $210,000 pretax cost savings annually. The press will be depreciated equally to zero per year and can be sold for $50,000 at the end of its life. The press also requires an initial investment in inventory of $30,000, and the level of inventory increases by $2,000 every year. Tax rate is 24% and the discount rate is 9%. Should the company undertake the project?

Reference no: EM132410893

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