Question

In: Finance

Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...

Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $181,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $73,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $3,700 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and its discount rate is 11 percent.

Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Solutions

Expert Solution

Please see the table below. Please be guided by the second column titled “Linkage” to understand the mathematics. The last row highlighted in yellow is your answer. Figures in parenthesis, if any, mean negative values. All financials are in $. Adjacent cells in blue contain the formula in excel I have used to get the final output.

Hence, the NPV = $ 106,059.18


Related Solutions

Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $460,000 is estimated to result in $190,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $74,000. The press also requires an initial investment in spare parts inventory of $35,000, along with an additional $3,850 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $470,000 is estimated to result in $196,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $72,000. The press also requires an initial investment in spare parts inventory of $37,000, along with an additional $3,950 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $420,000 is estimated to result in $166,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, 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 $27,000, along with an additional $3,450 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $475,000 is estimated to result in $199,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $72,000. The press also requires an initial investment in spare parts inventory of $38,000, along with an additional $4,000 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $465,000 is estimated to result in $193,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $73,000. The press also requires an initial investment in spare parts inventory of $36,000, along with an additional $3,900 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $400,000 is estimated to result in $154,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $54,000. The press also requires an initial investment in spare parts inventory of $23,000, along with an additional $3,250 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $157,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, 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 $24,000, along with an additional $3,300 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $157,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, 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 $24,000, along with an additional $3,300 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $181,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $73,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $3,700 in inventory for each succeeding year of the...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new...
Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $148,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation, and it will have a salvage value at the end of the project of $48,000. The press also requires an initial investment in spare parts inventory of $21,000, along with an additional $3,150 in inventory for each succeeding year of the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT