Tanaka Machine Shop is considering a fouryear project to improve its production efficiency. Buying a new machine
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Tanaka Machine Shop is considering a fouryear project to improve its production efficiency. Buying a new machine press for $445,000 is estimated to result in $160,000 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 $40,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $2,800 in inventory for each succeeding year of the project. If the shop’s tax rate is 22 percent and its discount rate is 9 percent, should the company buy and install the machine press?
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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