QRW Corp needs to replace an old lathe with a new, more efficient model. The old lathe was
purchased for $50,000 nine years ago and has a current book value of $5,000.
(The old machine is
being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000.
It will cost the company $10,000 to get the new lathe to the factory and get it installed. The old
machine will be sold as scrap metal for $2,000. The new machine is also being depreciated on a
straight-line basis over ten years. Sales are expected to increase by $8,000 per year while operating
expenses are expected to decrease by $12,000 per year. QRW's marginal tax rate is 40%. Additional
working capital of $3,000 is required to maintain the new machine and higher sales level. The initia
outlay for the new machine is
A) $111,000. B) $113,000. C) $109,800. D) $112,200.
C
You might also like to view...
Net income under variable costing is contribution margin less
a. cost of goods sold. b. fixed manufacturing overhead and fixed selling and administrative expenses. c. fixed manufacturing overhead and variable manufacturing overhead. d. variable selling and administrative expenses and fixed selling and administrative expenses.
The Sarbanes-Oxley Act of 2002 holds high-ranking corporate officials responsible for the validity and accuracy of their companies' financial statements
Indicate whether the statement is true or false