Question

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $405,000 is estimated to result in $149,000 in annual pretax cost savings. The press is eligible for 100 percent bonus depreciation and it will have a salvage value at the end of the project of $50,000. The press also requires an initial investment in spare parts inventory of $15,500, along with an additional $2,500 in inventory for each succeeding year of the project. The shop's tax rate is 25 percent and its discount rate is 12 percent. Calculate the project's NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV

Answer 1

NPV

41769.84

Year	Cost price	Pre taxcost saving*(1-Tax rate)	Bonus depreciation tax benefit	Working capital	Salvage*(1-Tax rate)	Total
0	-405000			-15500		-420500
1		111750	101250	-2500		210500
2		111750		-2500		109250
3		111750		-2500		109250
4		111750		23000	37500	172250

AutoSave Of Book1- Excel Sign in Comments Share File Home Formulas Review View Help OTell me what you want to do Insert Draw Page Layout Data Σ X Insert A A ab General Calibri 10 Delete Conditional Format as Find & Cell Sort & Paste A в I BIU Format T T T Formatting Table Filter Select Styles Clipboard Alignment Number Styles Cells Editing Font г. fix Cost price P40 T N P Q U v 35 36 37 38 39 Year Cost price Working capital Salvage (1-Tax rate) Total Bonus depreciation Pre taxcost saving (1-Tax rate) tax benefit 40 ESUM(P41:T41) 41 -405000 0 -15500 = 149000 (1-25%) - 149000*(1-25 %) - 149000*(1-25 % ) 149000 (1-25%) =SUM(P42: T42) 42 P41*-25% 1 2500 =SUM(P43:T43) 43 2 2500 44 SUM(P44:T44) =SUM(P45:T45) 3 2500 % ) -SUM(S41:S44) -50000* ( 1-25 45 4 46 =NPV(12% ,U42 : U45)+U41 47 NPV 48 49 ..Sheet2 Sheet4 Sheet3 Sheet5 Sheet6 Sheet7 Sheet8 Sheet9 Sheet10 +100 % Ready w е ENG P3 9:57 AM