H$8$ COST SAVINGS W$/$MACRS DEPRECIATION METHOD $(3$PTS$)$

Tanaka Machine Shop is considering a $4$ year 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 into the MACRS six$-$year asset class, and it will have a salvage value at the end of the $4$ year project of $$40,000.$ The press requires an initial spare parts inventory of $$20,000,$ along with an additional $$2,800$ in inventory for each succeeding year of the project. The shop's tax rate $=22\%$ and the discount rate $=9\%.$ Calculate the NPV and the IRR$\%$ of this project.

MACRS Depreciation Schedule for $6$ year Asset: Cost $=$$$445,000$

$\backslash$table$[[$Year$,\%$ Depr,Asset Depreciation,Accumulated Depr$],[1,20\mathrm{.}0\%,,],[2,32\mathrm{.}0\%,,],[3,19\mathrm{.}2\%,,],[4,11\mathrm{.}52\%,,],[5,11\mathrm{.}52\%,,],[6,5\mathrm{.}76\%,,]]$

Salvage Value $=$

Book Value at end of project life $\frac{?}{b}=ar($ Original $)$ Cost $-$ Accumulated Depr, Book Value $=$

After$-$Tax Salvage Value $=SV+(BV-SV)(t),$ After$-$Tax Salvage Value $=$

$\backslash$table$[[$Income Statement,Year $1,$Year $2,$Year $3,$Year $4],[$Cost Savings,,,,$],[$Depreciation$,,,,],[$EBT$,,,,],[$Taxes$,,,,],[$Net Income,,,,$],[$OCF $($Net Income $+$ Depr$),,,,]]$

$\backslash$table$[[$Project Cash Flows,Year $0,$Yr$1,$Yr$2,$Yr$3,$Yr$4],[$OCF$,,,,,],[$Investment$,,,,,],[$Salvage Value,,,,,$],[$NWC$,,,,,],[$TOTAL CF$,,,,,]]$

NPV $=$

IRR $=$