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.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: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 $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.g., 32.16.
Transcribed Image Text: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.g., 32.16.
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