A $73,000 machine with a 10-year class life was purchased 6 years ago. The machine will now be sold for $35,000 and replaced with a new machine costing $62,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project? NOTE -- ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE DOLLAR SIGN.
A $73,000 machine with a 10-year class life was purchased 6 years ago. The machine will now be sold for $35,000 and replaced with a new machine costing $62,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project? NOTE -- ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE DOLLAR SIGN.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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Question
16
![A $73,000 machine with a 10-year class life was purchased 6 years ago. The machine will now be
sold for $35,000 and replaced with a new machine costing $62,000, with a 5-year class life. The
new machine will not increase sales, but will decrease operating costs by $16,000 per year.
Simplified straight line depreciation is employed for both machines, and the marginal corporate
tax rate is 34 percent. What is the initial outlay for the project? NOTE -- ALTHOUGH THE
INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN
OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE
DOLLAR SIGN.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa6e31d1d-1384-4555-8e93-7be24d81329e%2F02ab270d-9b34-48d0-8fc4-359dcc477764%2Fqh8kdse_processed.png&w=3840&q=75)
Transcribed Image Text:A $73,000 machine with a 10-year class life was purchased 6 years ago. The machine will now be
sold for $35,000 and replaced with a new machine costing $62,000, with a 5-year class life. The
new machine will not increase sales, but will decrease operating costs by $16,000 per year.
Simplified straight line depreciation is employed for both machines, and the marginal corporate
tax rate is 34 percent. What is the initial outlay for the project? NOTE -- ALTHOUGH THE
INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN
OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE
DOLLAR SIGN.
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