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

Accounting

Problem:

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $490,000 is estimated to result in $189,000 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 $57,500. The press also requires an initial investment in spare parts inventory of $21,500, along with an additional $3,500 in inventory for each succeeding year of the project. The shop's tax rate is 35 percent and its discount rate is 11 percent.

Requirement:

Question: Calculate the NPV.

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167241

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