Homework answers / question archive / Blue Line Machine Shop is considering a four-year project to improve its production efficiency

Blue Line Machine Shop is considering a four-year project to improve its production efficiency

Finance

Share With

Blue Line Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $510,000 is estimated to result in $210,000 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 $86,000. The press also requires an initial investment in spare parts inventory of $24,000, along with an additional $2,900 in inventory for each succeeding year of the project. The shop's tax rate is 30 percent and the project's required return is 8 percent.

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

NPV         $ 

 _______________

Should the company buy and install the machine press?

multiple choice

• Yes
• No

View CommentsFlag Question