Chapman Machine Shop Is Considering a 4-Year Project to Improve

question 94

Multiple Choice

Chapman Machine Shop is considering a 4-year project to improve its production efficiency.Buying a new machine press for $576,000 is estimated to result in $192,000 in annual pretax cost savings.The press falls in the MACRS 5-year class,and it will have a salvage value at the end of the project of $84,000.The press also requires an initial investment in spare parts inventory of $24,000,along with an additional $3,600 in inventory for each succeeding year of the project.The inventory will return to its original level when the project ends.The shop's tax rate is 35 percent and its discount rate is 11 percent.Should the firm buy and install the machine press? Why or why not?

• A)no; The net present value is -$7,489.
• B)no; The net present value is -$667.
• C)yes; The net present value is $211.
• D)yes; The net present value is $4,319.
• E)yes; The net present value is $8,364.

---

Definitions:

High Position

A status within an organization that carries a significant level of authority, responsibility, and influence over decision-making processes.

Power

The capacity or ability to direct or influence the behavior of others or the course of events.

Prestige

The level of respect, admiration, or esteem that a person, organization, or entity is regarded with, often based on perceived success, achievement, or quality.

Superiority

The state or quality of being superior or better than others, often in skills, performance, or status.