A $87,000 machine with a 9-year class life was purchased 4 years ago. The machinewill now be sold for $39,000 and replaced with a new machine costing $60,000,with a 5-year class life. The new machine will not increase sales, but will decreaseoperating costs by $16,000 per year. Simplified straight line depreciation isemployed for both machines, and the marginal corporate tax rate is 34 percent.What is the initial outlay for the project? NOTE -- ALTHOUGH THE INITIALOUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. INOTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOTENTER THE DOLLAR SIGN.

calculating the initial outlay for the project 1. Calculate the book value of the old machine: -…

Answered: A $87,000 machine with a 9-year class…

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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Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $13.5 million, of which 65% has been depreciated. The used equipment can be sold today for $5.4 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

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