Net present value-annual pretax cost savings

Assignment Help Financial Management
Reference no: EM131320972

CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $486,000 is estimated to result in $185,000 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 $55,500. The press also requires an initial investment in spare parts inventory of $21,100, along with an additional $3,100 in inventory for each succeeding year of the project. The shop’s tax rate is 35 percent and its discount rate is 11 percent.

Calculate the NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Net present value              $

Reference no: EM131320972

Questions Cloud

Discuss how you have planned for your retirement so far : Discuss how you have planned for your retirement so far, whether you are on track to reaching your goals, and what changes you need to make. Are there any specific ideas that will help you reach your goals and if so, discuss.
Yield to maturity and required returns : Yield to Maturity and Required Returns The Brownstone Corporation's bonds have 6 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. What is the yield to maturity at a current..
Write program that stores this information in a two-d array : Write a program that stores this information in a two dimensional 3 × 7 array, where each row represents a different monkey and each column represents a different day of the week.
How should volkswagen handle the emissions scandal : How should Volkswagen handle the emissions scandal in an ethical way? Discuss the related ethical issues from both consumer and brand manager perspectives
Net present value-annual pretax cost savings : CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $486,000 is estimated to result in $185,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Ta..
Bond valuation and interest rate risk : Bond Valuation and Interest Rate Risk The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. What will be the value of ..
Develop auto inventory system which contains functionality : You will develop a simple auto inventory system which contains the following basic functionality: Read the supplied autoInventory.txt file to obtain the auto inventory with the file path supplied as the first run-time parameter.
Which variable would enter the equation first and why : If a standard or simultaneous regression analysis was conducted on these data, what is the smallest that the multiple correlation between the five predictor variables and the criterion variable could possibly be? (This one will take some thought.)
What is their yield to maturity-what is their yield to call : Yield to Maturity and Call with Semiannual Payments Thatcher Corporation's bonds will mature in 11 years. The bonds have a face value of $1,000 and an 9% coupon rate, paid semiannually. The price of the bonds is $1,050. The bonds are callable in 5 ye..

Reviews

Write a Review

Financial Management Questions & Answers

  What was the funds return and what was investors return

The Global Growth Fund is a load fund with a 6 percent front load fee. It started the year with a Net Asset Value (NAV) of $16.50. During the year the fund distributed $1.05, and at the end of the year its NAV was $17.95. What was the fund's return, ..

  What is the payoff from a call option on the cumulative

Weather derivatives are often written in terms of HDD and CDD, heating degree days and cooling degree days, where on a given day, HDD = max(0,65-A) CDD = max(0,A-65) A = average of the day’s low and high temperatures. What is the payoff from a call o..

  What are the problems with americarsquos current medical

1.what concepts in the chapter are illustrated in this case? who are the stakeholders in this case?2. what are the

  Part of your financial planning

As part of your financial planning, you wish to purchase a new car exactly 6 years from today. The car you wish to purchase costs ?$11000 ?today, and your research indicates that its price will increase by 2?% to 4?% per year over the next 6 years. E..

  What was its basic earning power ratio

x-1 corp's total assets at the end of last year were $405,000 and its ebit was 52,500. what was its basic earning power (bep) ratio?

  Initial investment outlay for machine for caputal budgteing

You must evaluate a proposal to buy a new milling machine. The base price is $108,000 and the shipping and installation costs would ass another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $65,000. Wh..

  Achieve its targeted weighted average cost of capital

Central Systems, Inc. desires a weighted average cost of capital of 9 percent. The firm has an after-tax cost of debt of 6 percent and a cost of equity of 12 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted aver..

  What effective annual interest rate does the firm

A firm offers terms of 2.6/7, net 30. What effective annual interest rate does the firm earn when a customer does not take the discount? What effective annual interest rate does the firm earn if the terms are changed to 3.6/7, net 30, and the custome..

  How much money will he have at the end of one year

Stanford Simmons, who recently sold his Porsche, placed $10,000 in a savings account paying annual compound interest of 6 percent. Calculate the amount of money that he will have accrued if he leaves the money in the bank without making any additiona..

  What risks and opportunities do the three common strategies

you will explore how businesses react to changing economic times and the influence this has on productservice

  What are the short run and long run effects

What are the short-run and long-run effects on the earnings of each of the following: Labor employed in the wheat industry? - Labor in the cloth industry?

  What is the projected dividend for the coming year

Frey Corp. is experiencing rapid growth. Dividends are expected to grow at 26 percent per year during the next three years, 16 percent over the following year, and then 9 percent per year indefinitely. The required return on this stock is 11 percent,..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd