Question
In: Finance
Blue Line machine shop is considering a four-year project to improve its production efficiency. Buying a...
Blue Line machine shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $570,000 is estimated to result in $240,000 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 $96,000. The press also requires an initial investment in spare parts inventory of $30,000, along with an additional $3,500 in inventory for each succeeding year of the project. The shop tax rate is 30 percent and the project's required return is 8 percent.
A/ Calculate the NPV of this project
B/ Should the company buy and install the machine press?
Solutions
jeff jeffy answered 1 month agoRelated Solutions
Blue Line Machine Shop is considering a four-year project to improve its production efficiency. Buying a...
Blue Line Machine Shop is considering a four-year project to
improve its production efficiency. Buying a new machine press for
$556800 is estimated to result in $185600 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 $81200. The press
also requires an initial investment in spare parts inventory of
$23200, along with an additional $3,480 in inventory for each
succeeding year of...
Blue line machine shop is considering a four-year project to improve its production efficiency. Buying a...
Blue line machine shop is considering a four-year project to
improve its production efficiency. Buying a new machine press for
$485,000 is estimated to result in $179,000 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 $15,000, along with an additional $4,000 in inventory for each
succeeding year of...
Massey Machine Shop is considering a four year project to improve its production efficiency. Buying a...
Massey Machine Shop is considering a four year project to
improve its production efficiency. Buying a new machine press for
$730,000 is estimated to result in $220,000 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 $89,000. The
press also requires an initial investment in spare parts inventory
of $26,000, along with an additional $3,000 in inventory for each
succeeding year...
Massey Machine Shop is considering a four year project to improve its production efficiency. Buying a...
Massey Machine Shop is considering a four year project to
improve its production efficiency.
Buying a new machine press for $730,000 is estimated to result
in $220,000 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 $89,000. The press also requires an
initial investment in spare parts
inventory of $26,000, along with an additional $3,000 in
inventory for each succeeding year...
CMS Machine Shop is considering a four-year project to improve its production efficiency. Buying a new...
CMS Machine Shop is considering a four-year project to improve
its production efficiency. Buying a new machine press for $545,000
is estimated to result in $97,000 in annual pretax cost savings.
The press falls in the MACRS five-year class, and it will have a
salvage value of $70,000. The press also requires an initial
working capital of $21,000, along with an additional $3,000 in
working capital for each succeeding years of project. The tax rate
is 34%, and the company's...
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
$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...
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a...
Purple Haze Machine Shop is considering a four-year project to
improve its production efficiency. Buying a new machine press for
$490,847 is estimated to result in some amount of annual pretax
cost savings. The press will have an aftertax salvage value at the
end of the project of $86,695. The OCFs of the project during the 4
years are $175,493, $191,453, $170,805 and $167,265, respectively.
The press also requires an initial investment in spare parts
inventory of $25,940, along with...
Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new...
Geary Machine Shop is considering a four-year project to improve
its production efficiency. Buying a new machine press for
$1,132,800 is estimated to result in $377,600 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 $165,200. The press also requires an initial investment in spare
parts inventory of $47,200, along with an additional $7,080 in
inventory for each succeeding year...
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...
Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new...
Geary Machine Shop is considering a four-year project to improve
its production efficiency. Buying a new machine press for $950,400
is estimated to result in $316,800 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 $138,600.
The press also requires an initial investment in spare parts
inventory of $39,600, along with an additional $5,940 in inventory
for each succeeding year...
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