Question
In: Finance
Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new...
| Geller 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 21 percent and the project's required return is 8 percent. Refer to Table 8.3. |
| Calculate the NPV of this project. |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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its production efficiency. Buying a new machine press for $415,000
is estimated to result in $154,000 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 $55,000. The
press also requires an initial investment in spare parts inventory
of $16,000, along with an additional $3,000 in inventory for each
succeeding year...
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