Requires initial investment in spare parts inventory

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Reference no: EM131317824

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $504,000 is estimated to result in $203,000 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 $64,500. The press also requires an initial investment in spare parts inventory of $22,900, along with an additional $4,900 in inventory for each succeeding year of the project. The shop’s tax rate is 30 percent and its discount rate is 13 percent.

Reference no: EM131317824

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