Tanaka Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $500,000 is estimated to result in $205,000 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 $84,000. Refer to Table 8.3. The press also requires an initial investment in spare parts inventory of $23,000, along with an additional $2,800 in inventory for each succeeding year of the project. The shop’s tax rate is 23 percent and the project's required return is 9 percent. Calculate the NPV of this project.
