Question

Masters Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $385,000 is estimated to result in $145,000 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 $45,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $3,100 in inventory for each succeeding year of the project. The shop’s tax rate is 22 percent and its discount rate is 9 percent. Refer to Table 10.7.

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

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

DEPRECIATION TABLE WAS NOT PROVIDED. SO I HAVE USED THE ONE WHICH WAS AVAILABLE WITH ME. IF DEPRECIATION RATES ARE DIFFERENT IN YOUR TABLE, THEN KINDLY PROVIDE THE TABLE