Boyertown Industrial Tools Is Considering a Three-Year Project to Improve

question 65

Multiple Choice

Boyertown Industrial Tools is considering a three-year project to improve its production efficiency.Buying a new machine ress for $578,000 is estimated to result in $184,000 in annual pretax cost savings.The press falls in the MACRS five-year class,which has percentage rates starting with Year 1,of 20,32,19.20,11.52,11.52,and 5.76.The salvage value at the end of the project of $162,000.The press also requires an initial investment in spare parts inventory of $19,000,along with an additional $1,500 in inventory for each succeeding year of the project.The inventory will all be recovered when the project ends.If the tax rate is 35 percent and the discount rate is 12 percent,should the company buy and install the machine press? Why or why not?

• A)Yes; the NPV is $51,613.33
• B)Yes; the NPV is $45,602.57
• C)No; the NPV is -$22,311.09
• D)No; the NPV is -$52,918.78
• E)Yes; the NPV is $64,728.29

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Definitions:

Downstream

In a supply chain, refers to processes or activities that occur after a particular point, often closer to the end customer.

Pull Model

A supply chain model where the initiation of production and movement of goods is based on customer demand rather than anticipating it.

Cloud-Based

Pertaining to services, applications, or data storage hosted on remote servers accessed through the internet.

Open-Source

Pertaining to software for which the source code is freely available for modification and distribution by anyone.