Masters Machine Shop is considering a four-year project to improve itsproduction efficiency. Buying a new machine press for $844,800 is estimatedto result in $281,600 in annual pretax cost savings. The press falls in theMACRS five-year class (MACRS Table), and it will have a salvage value at theend of the project of $123,200. The press also requires an initial investment inspare parts inventory of $35,200, along with an additional $5,280 in inventoryfor each succeeding year of the project.If the shop's tax rate is 25 percent and its discount rate is 12 percent, what isthe NPV for this project?Multiple Choice$-924.19$1,690.87$-92,906.13○ $-970.40○ $-877.99

Pretax cost savings are savings that a business realizes on expenditures or costs prior to deducting…

Answered: Multiple Choice О $-924.19

Business

Finance

Multiple Choice О $-924.19

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Question

Masters Machine Shop is considering a four-year project to improve its
production efficiency. Buying a new machine press for $844,800 is estimated
to result in $281,600 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 $123,200. The press also requires an initial investment in
spare parts inventory of $35,200, along with an additional $5,280 in inventory
for each succeeding year of the project.
If the shop's tax rate is 25 percent and its discount rate is 12 percent, what is
the NPV for this project?
Multiple Choice
$-924.19
$1,690.87
$-92,906.13
○ $-970.40
○ $-877.99

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