Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $410,000 is estimated to result in $160,000 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 $69,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $14,000, along with an additional $1,900 in inventory for each succeeding year of the project. The shop's tax rate is 21 percent and the project's required return is 8 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.q., 32.16.

Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $410,000 is estimated to result in $160,000 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 $69,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $14,000, along with an additional $1,900 in inventory for each succeeding year of the project. The shop's tax rate is 21 percent and the project's required return is 8 percent. Calculate the NPV of this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.q., 32.16.

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Description: son.2 Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $410,000is estimated to result in $160,000 in annual pretax cost savings. The press falls in the MACRS five-year class,

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 14P

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