Tanaka Machine Shop is considering a four-year project to improve its productionefficiency. Buying a new machine press for $445,000 is estimated to result in $160,000in annual pretax cost savings. The press falls in the MACRS five-year class, and it willhave a salvage value at the end of the project of $40,000. The press also requires aninitial investment in spare parts inventory of $20,000, along with an additional $2,800 ininventory for each succeeding year of the project. The shop's tax rate is 22 percent andits discount rate is 9 percent. Refer to Table 10.7Calculate the NPV of this project. (Do not round intermediate calculations and roundyour answer to 2 decimal places, e.g., 32.16.)NPVShould the company buy and install the machine press?O NoO Yes Property ClassYearThree-YearFive-YearSeven-Year133.33%20.00%14.29 %44.4532.0024.4914.8119.2017.494.7.4111.5212.495.11.528.935.768.926.8.937.4.468.2.

Net present value is the difference between the present value of cash inflows and present value of…

Tanaka Machine Shop is considering a four-year project to improve its producti efficiency. Buying a new machine press for $445,000 is estimated to result in $160,00 in annual pretax cost savings. The press falls in the MACRS five-year class, and it we have a salvage value at the end of the project of $40,000. The press also requires a initial investment in spare parts inventory of $20,000, along with an additional $2,800 inventory for each succeeding year of the project. The shop's tax rate is 22 percent an its discount rate is 9 percent. Refer to Table 10.7 Calculate the NPV of this project. (Do not round intermediate calculations and rounc your answer to 2 decimal places, e.g., 32.16.) NPV

Tanaka Machine Shop is considering a four-year project to improve its producti efficiency. Buying a new machine press for $445,000 is estimated to result in $160,00 in annual pretax cost savings. The press falls in the MACRS five-year class, and it we have a salvage value at the end of the project of $40,000. The press also requires a initial investment in spare parts inventory of $20,000, along with an additional $2,800 inventory for each succeeding year of the project. The shop's tax rate is 22 percent an its discount rate is 9 percent. Refer to Table 10.7 Calculate the NPV of this project. (Do not round intermediate calculations and rounc your answer to 2 decimal places, e.g., 32.16.) NPV

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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