About the annual pretax cost savings

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Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $450,000 is estimated to result in $180,000 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 $76,000. The press also requires an initial investment in spare parts inventory of $18,000, along with an additional $2,300 in inventory for each succeeding year of the project. The shop’s tax rate is 35 percent and its discount rate is 9 percent. MACRS schedule

Calculate the NPV of this project.

Reference no: EM13913408

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