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A consultant has recommended that you modernize a production line. Costs include $870,000 in equipment, a $15,000 investment in net working capital at the time of installation, and $11,000 in delivery and installation costs. The consultant has billed the firm for $20,500 for her analysis of the project. If the project is undertaken, an employee training program costing $36,000 would be required. The old machinery has no book value but can be sold for $10,000. Your firm's marginal tax rate is 34%. What is the initial outlay associated with the project?

A consultant has recommended that you modernize a production line. Costs include $870,000 in equipment, a $15,000 investment in net working capital at the time of installation, and $11,000 in delivery and installation costs. The consultant has billed the firm for $20,500 for her analysis of the project. If the project is undertaken, an employee training program costing $36,000 would be required. The old machinery has no book value but can be sold for $10,000. Your firm's marginal tax rate is 34%. What is the initial outlay associated with the project?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A consultant has recommended that you modernize a production line. Costs include $870,000 in equipment, a $15,000 investment in net working capital at the time of installation, and $11,000 in delivery and installation costs. The consultant has billed the firm for $20,500 for her analysis of the project. If the project is undertaken, an employee training program costing $36,000 would be required. The old machinery has no book value but can be sold for $10,000. Your firm's marginal tax rate is 34%. What is the initial outlay associated with the project?
Transcribed Image Text:A consultant has recommended that you modernize a production line. Costs include $870,000 in equipment, a $15,000 investment in net working capital at the time of installation, and $11,000 in delivery and installation costs. The consultant has billed the firm for $20,500 for her analysis of the project. If the project is undertaken, an employee training program costing $36,000 would be required. The old machinery has no book value but can be sold for $10,000. Your firm's marginal tax rate is 34%. What is the initial outlay associated with the project?
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