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Jan 26, 2015, 01:35 AM
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NPV
| Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $640,000 is estimated to result in $270,000 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 $70,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $3,500 in inventory for each succeeding year of the project. The shop's tax rate is 35 percent and its discount rate is 14 percent. |
Calculate the NPV of this project.
I tried using the cost savings, Depreciation, EBIT, EBIT(1-t) but I was unable to finish. |
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