Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $550,000 is estimated to result in$230,000 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 $93,000. The press also requires an intial investment in spare parts inventory of $28,000, along with an additional $3,300 in inventory for each succeeding year of the projects. The shops tax rate is 34 percent and its discount rate is 9 percent.

Calculate the NPV of this project.

Should the company buy and install the machine press? Yes or No

Property Class Year Three-Year 33.33% 44.45 14.81 7.41 Five-Year Seven-Yea 20.00% 32.00 19.20 11.52 11.52 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 2 3 4 5 5.76 7