Question

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $547,200 is estimated to result in $182,400 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 $79,800. The press also requires an initial investment in spare parts inventory of $22,800, along with an additional $3,420 in inventory for each succeeding year of the project.

  

Required :

If the shop's tax rate is 32 percent and its discount rate is 13 percent, what is the NPV for this project? (Do not round your intermediate calculations.)

Multiple Choice:

• $-26,483.98

• $-24,701.48

• $-84,615.53

• $-27,808.17

• $-25,159.78

Answer 1