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

70.2K

Verified Solution

Question

Finance

Geary Machine Shop is considering a four-year project to improveits production efficiency. Buying a new machine press for$1,142,400 is estimated to result in $380,800 in annual pretax costsavings. The press falls in the MACRS five-year class (MACRSTable), and it will have a salvage value at the end of the projectof $166,600. The press also requires an initial investment in spareparts inventory of $47,600, along with an additional $7,140 ininventory for each succeeding year of the project.

Required :
If the shop's tax rate is 31 percent and its discount rate is 13percent, what is the NPV for this project? (Do not roundyour intermediate calculations.)

Answer & Explanation Solved by verified expert

3.9 Ratings (570 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

Geary Machine Shop is considering a four-year project to improveits production efficiency. Buying a new machine press for$1,142,400 is estimated to result in $380,800 in annual pretax costsavings. The press falls in the MACRS five-year class (MACRSTable), and it will have a salvage value at the end of the projectof $166,600. The press also requires an initial investment in spareparts inventory of $47,600, along with an additional $7,140 ininventory for each succeeding year of the project. Required :If the shop's tax rate is 31 percent and its discount rate is 13percent, what is the NPV for this project? (Do not roundyour intermediate calculations.)