Business, 17.03.2020 04:35 Jaymp2706jj

Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $455,000 is estimated to result in $187,000 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 $75,000. The press also requires an initial investment in spare parts inventory of $34,000, along with an additional $3,800 in inventory for each succeeding year of the project. The shop’s tax rate is 24 percent and its discount rate is 9 percent. (MACRS schedule)

NPV:

Calculate the NPV of this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)
Should the company buy and install the machine press?

a. Yes
b. No

Answers: 1

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Starset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a...