CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new...

80.2K

Verified Solution

Question

Finance

CSM Machine Shop is considering a four-year project to improveits production efficiency. Buying a new machine press for $425,000is estimated to result in $159,000 in annual pretax cost savings.The press falls in the MACRS five-year class (MACRS Table) and itwill have a salvage value at the end of the project of $60,000. Thepress also requires an initial investment in spare parts inventoryof $16,500, along with an additional $3,500 in inventory for eachsucceeding year of the project. The shop’s tax rate is 25 percentand its discount rate is 12 percent. Calculate the project's NPV.(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

Answer & Explanation Solved by verified expert

4.1 Ratings (588 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

CSM Machine Shop is considering a four-year project to improveits production efficiency. Buying a new machine press for $425,000is estimated to result in $159,000 in annual pretax cost savings.The press falls in the MACRS five-year class (MACRS Table) and itwill have a salvage value at the end of the project of $60,000. Thepress also requires an initial investment in spare parts inventoryof $16,500, along with an additional $3,500 in inventory for eachsucceeding year of the project. The shop’s tax rate is 25 percentand its discount rate is 12 percent. Calculate the project's NPV.(Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)