Question

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $844,800 is estimated to result in $281,600 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 $123,200. The press also requires an initial investment in spare parts inventory of $35,200, along with an additional $5,280 in inventory for each succeeding year of the project. Required : If the shop's tax rate is 32 percent and its discount rate is 9 percent, what is the NPV for this project? (Do not round your intermediate calculations.)

$40,159.39

$42,303.17

$-63,504.52

$42,167.36

$38,151.42

Answer 1