A $80,000 machine with a 10-year class life was purchased 5 years ago. The machine will now be sold for $24,000 and replaced with a new machine costing $60,000, 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 $80,000 machine with a 10-year class life was purchased 5 years ago. The machine will now be sold for $24,000 and replaced with a new machine costing $60,000, 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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A $80,000 machine with a 10-year class life was purchased 5 years ago. The machine will now be sold
for $24,000 and replaced with a new machine costing $60,000, 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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