5. Massey Machine Shop is considering a three-year machine press project to improve its production efficiency....

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5. Massey Machine Shop is considering a three-year machine press project to improve its production efficiency. Six months ago, it contracted with Dr. Wright to provide a thorough study of whether there would be a need for this three-year efficiency project. The report was delivered one month ago and its cost was $50,000. The report suggested that the company should go ahead with the project subject to Massey's more detailed financial analysis. Buying a new machine press for $600,000 will result in $180,000 in annual pretax cost savings. The machine falls in the MACRS five-year class and it will have a salvage value at the end of the project of $60,000. At time 0, the press will also require an additional investment in inventory of $10,000 and accounts payable will also increase by $3000, every other current accounts remain the same. Except for this one time increase of $10000 and $3000, the inventory and accounts payable levels will not change during the life of the project. If the company's tax rate is 20% and its costing of funding is 12%, should the company accept the project? (30 pts). The 5-year MACRS schedule is as follows: Year -23456 5-year Class 20% 32% 19.2% 11.52% 11.52% 5.76% 5. Massey Machine Shop is considering a three-year machine press project to improve its production efficiency. Six months ago, it contracted with Dr. Wright to provide a thorough study of whether there would be a need for this three-year efficiency project. The report was delivered one month ago and its cost was $50,000. The report suggested that the company should go ahead with the project subject to Massey's more detailed financial analysis. Buying a new machine press for $600,000 will result in $180,000 in annual pretax cost savings. The machine falls in the MACRS five-year class and it will have a salvage value at the end of the project of $60,000. At time 0, the press will also require an additional investment in inventory of $10,000 and accounts payable will also increase by $3000, every other current accounts remain the same. Except for this one time increase of $10000 and $3000, the inventory and accounts payable levels will not change during the life of the project. If the company's tax rate is 20% and its costing of funding is 12%, should the company accept the project? (30 pts). The 5-year MACRS schedule is as follows: Year -23456 5-year Class 20% 32% 19.2% 11.52% 11.52% 5.76%