Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $500,000 is estimated to result in $205,000 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 $84,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $23,000, along with an additional $2,800 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and the project's required return is 9 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV
Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $500,000 is estimated to result in $205,000 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 $84,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $23,000, along with an additional $2,800 in inventory for each succeeding year of the project. The shop's tax rate is 23 percent and the project's required return is 9 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. NPV
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Tanaka Machine Shop is considering a four-year project to improve its production
efficiency. Buying a new machine press for $500,000 is estimated to result in $205,000 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 $84,000. Refer to Table 8.3. The press also
requires an initial investment in spare parts inventory of $23,000, along with an additional
$2,800 in inventory for each succeeding year of the project. The shop's tax rate is 23
percent and the project's required return is 9 percent. Calculate the NPV of this project.
Note: Do not round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.
NPV
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