Question

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $768,000 is estimated to result in $256,000 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 $112,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $4,800 in inventory for each succeeding year of the project. Required : If the shop's tax rate is 31 percent and its discount rate is 8 percent, what is the NPV for this project? (Do not round your intermediate calculations.)

$59,684.25

$61,469.88

$-37,942.58

$62,668.46

$56,700.03

Answer 1