Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 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 $66,000. The press also requires an Initial investment in spare parts inventory of $12,000, along with an additional $1,700 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and the projects required return is 9 percent Refer to Table 8.3. Calculate the NPV of this project. (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Geller Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 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 $66,000. The press also requires an Initial investment in spare parts inventory of $12,000, along with an additional $1,700 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and the projects required return is 9 percent Refer to Table 8.3. Calculate the NPV of this project. (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 9P
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