Question

Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 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 $66,000. The press also requires an initial investment in spare parts inventory of $12,000, along with an additional $1,700 in inventory for each succeeding year of the project. The shop’s tax rate is 23 percent and the project's required return is 9 percent. Refer to Table 8.3. Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1