CSM Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $433,000 is estimated to result in $163,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table) and it will have a salvage value at the end of the project of $64,000. The press also requires an initial investment in spare parts inventory of $16,900, along with an additional $3,900 in inventory for each succeeding year of the project. The shop’s tax rate is 24 percent and its discount rate is 11 percent.
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