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In: Finance
Cambridge Analytics is considering a four-year project to improve its production efficiency. Buying a new machine...
Cambridge Analytics is considering a four-year project to improve its production efficiency. Buying a new machine press for $600,000 is estimated to result in $210,000 pretax cost savings annually. The press will be depreciated equally to zero per year and can be sold for $80,000 at the end of its life. The press also requires an initial investment in inventory of $20,000, and the level of inventory increases by $3,000 every year. Tax rate is 17% and the discount rate is 9%. Should the company undertake the project?
(do it with steps, with formula)
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Cambridge Analytics is considering a four-year project to improve its production efficiency. Buying a new machine...
Cambridge Analytics is considering a four-year project to
improve its production efficiency. Buying a new machine press for
$600,000 is estimated to result in $210,000 pretax cost savings
annually. The press will be depreciated equally to zero per year
and can be sold for $80,000 at the end of its life. The press also
requires an initial investment in inventory of $20,000, and the
level of inventory increases by $3,000 every year. Tax rate is 17%
and the discount rate...
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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
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The press falls in the MACRS five-year class (MACRS Table), and it
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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 $82,600. The
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press also requires an initial investment in spare parts inventory
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succeeding year...
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Warmack Machine Shop is considering a four-year project to
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$510,000 is estimated to result in $210,000 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 $86,000. The
press also requires an initial investment in spare parts inventory
of $24,000, along with an additional $2,900 in inventory for each
succeeding year of the...
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