Question
In: Finance
Starset Machine Shop is considering a 4-year project to improve its production efficiency.
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 falls in the 5-year MACRS class, 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 project. The shop’s tax rate is 24 percent and its discount rate is 11 percent. (MACRS schedule)
Calculate the NPV of this project.
Should the company buy and install the machine press?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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salvage value at the end of the project of $72,000. The press also
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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
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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
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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...
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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...
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The press falls in the 5-year MACRS class, and it will have a
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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...
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