Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Please assist me in solving this question using Excel.
![Problem 9-23 Cost-Cutting Proposals [LO 2]
Tanaka Machine Shop is considering a four-year project to improve its
production efficiency. Buying a new machine press for $401,000 is estimated
to result in $147,000 in annual pretax cost savings. The press falls in the
MACRS five-year class (MACRS schedule) and it will have a salvage value at
the end of the project of $48,000. The press also requires an initial investment
in spare parts inventory of $15,300, along with an additional $2,300 in
inventory for each succeeding year of the project. The shop's tax rate is 23
percent and its discount rate is 10 percent. Calculate the project's NPV.
Note: Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.
Net present value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F483c3d17-1621-47af-bfd2-86acecf64938%2F6ba2910a-657b-48a6-aa23-8894630b6ebf%2Fkckbtue_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 9-23 Cost-Cutting Proposals [LO 2]
Tanaka Machine Shop is considering a four-year project to improve its
production efficiency. Buying a new machine press for $401,000 is estimated
to result in $147,000 in annual pretax cost savings. The press falls in the
MACRS five-year class (MACRS schedule) and it will have a salvage value at
the end of the project of $48,000. The press also requires an initial investment
in spare parts inventory of $15,300, along with an additional $2,300 in
inventory for each succeeding year of the project. The shop's tax rate is 23
percent and its discount rate is 10 percent. Calculate the project's NPV.
Note: Do not round intermediate calculations and round your answer to 2
decimal places, e.g., 32.16.
Net present value
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