Problem:
Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $460,000 is estimated to result in $185,000 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 $78,000. The press also requires an initial investment in spare parts inventory of $19,000, along with an additional $2,400 in inventory for each succeeding year of the project. The shop's tax rate is 34 percent and its discount rate is 10 percent.
Required:
Question: Calculate the NPV of this project.
Note: Be sure to show how you arrived at your answer.