Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $423,000 is estimated to result in $158,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $59,000. The press also requires an initial investment in spare parts inventory of $16,400, along with an additional $3,400 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and its discount rate is 11 percent. Calculate the project's NPV. Note: Do not round intermediate calculations and round your answer to 2 decimal places. 3216

Essentials Of Investments
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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for
$423,000 is estimated to result in $158,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation and
it will have a salvage value at the end of the project of $59,000. The press also requires an initial investment in spare parts inventory
of $16,400, along with an additional $3,400 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and
its discount rate is 11 percent. Calculate the project's NPV.
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
× Answer is complete but not entirely correct.
NPV
$ 73,412.79 x
Transcribed Image Text:Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $423,000 is estimated to result in $158,000 in annual pretax cost savings. The press qualifies for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $59,000. The press also requires an initial investment in spare parts inventory of $16,400, along with an additional $3,400 in inventory for each succeeding year of the project. The shop's tax rate is 24 percent and its discount rate is 11 percent. Calculate the project's NPV. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. × Answer is complete but not entirely correct. NPV $ 73,412.79 x
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