Question

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $710,400 is estimated to result in $236,800 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $103,600. The press also requires an initial investment in spare parts inventory of $29,600, along with an additional $4,440 in inventory for each succeeding year of the project. Required : If the shop's tax rate is 34 percent and its discount rate is 11 percent, what is the NPV for this project? (Do not round your intermediate calculations.)

Answer 1