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

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Finance

Masters Machine Shop is considering a four-year project toimprove its production efficiency. Buying a new machine press for$988,800 is estimated to result in $329,600 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 $144,200. The press also requires an initial investment in spareparts inventory of $41,200, along with an additional $6,180 ininventory for each succeeding year of the project.
If the shop's tax rate is 24 percent and its discount rate is 11percent, what is the NPV for this project?
Multiple Choice
$26,323.17
$29,212.46
$-85,094.26
$27,639.33
$25,007.02

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4.4 Ratings (895 Votes)

Answer is 2632317 Initial Investment 988800 Useful Life 4 years Depreciation Year 1 2000 988800 Depreciation Year 1 197760 Depreciation Year 2 3200 988800 Depreciation Year 2 316416 Depreciation Year 3 1920 988800 Depreciation Year 3 18984960 Depreciation Year 3 1152 988800 Depreciation Year 3 11390976 Book Value at the end of Year 4 988800 197760 316416 18984960 See Answer

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