Annual pretax cost savings-production efficiency

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Reference no: EM13795309

Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $854,400 is estimated to result in $284,800 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 $124,600. The press also requires an initial investment in spare parts inventory of $35,600, along with an additional $5,340 in inventory for each succeeding year of the project. All investment in Net Working Capital is recovered at the end of the project's life.

Required:

If the shop's tax rate is 30 percent and its discount rate is 15 percent, what is the NPV for this project? (Do not round your intermediate calculations.).

Reference no: EM13795309

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