Problem $6-13$ Cost$-$Cutting Proposals

Tanaka Machine Shop is considering a $4-$year project to improve its production

efficiency. Buying a new machine press for $$420,000$ is estimated to result in $$166\mathrm{.}000$

in annual pretax cost savings. The press falls in the $5-$year MACRS class, and it will have

a salvage value at the end of the project of $$66,000.$ The press also requires an initial

investment in spare parts inventory of $$27,000,$ along with an additional $$3,450$ in

inventory for each succeeding year of the project. The shop's tax rate is $22$ percent and

its discount rate is $9$ percent. $($MACRS schedule$)$ Calculate the NPV of this project. $($Do

not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,$

$32\mathrm{.}16.)$

Should the company buy and install the machine press?

No

Yes