Massey machine shop is considering a four-year project to, Ask an Expert

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Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $570,000 is estimated to result in $240,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $96,000. The press also requires an initial investment in spare parts inventory of $30,000, along with an additional $3,500 in inventory for each succeeding year of the project. The shop’s tax rate is 30 percent and its discount rate is 8 percent. Refer to the MACRS schedule.

Calculate the NPV of this project.

Should Massey buy and install the machine press?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92783324

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