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

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Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $390,000 is estimated to result in $150,000 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 $66,000. The press also requires an initial investment in spare parts inventory of $12,000, along with an additional $1,700 in inventory for each succeeding year of the project. The shop’s tax rate is 35 percent and its discount rate is 9 percent. Refer to Table 10.7.

Calculate the NPV of this project?

Should the company buy and install the machine press?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91549202

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