A company is considering a machine acquisition. The new machine will cost $ 60.000 and the shipping and installation costs are $ 20.000, all are paid in cash. The old machine is fully depreciated and will be sold for $ 5.000 cash immediately with the purchase of the new one. The useful life of the new machine is 5 years and the company uses accelerated method of depreciation. Tax rate is 20% for the company. What is the investment cash outflow? A) $36.000 B) $43.000 C) $48.000 D) $56.000 E) $76.000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A company is considering a machine acquisition. The new machine will cost $ 60.000 and the shipping and installation costs are $ 20.000, all are paid in cash. The old machine is fully
A) $36.000
B) $43.000
C) $48.000
D) $56.000
E) $76.000
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