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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Question
The Fleming Company, a food distributor, is considering replacing a filling line at its Oklahoma City warehouse. The existing line was purchased several years ago for $600,000. The line’s book value is $200,000, and Fleming management feels it could be sold at this time for $150,000. A new, increased capacity line can be purchased for $1,200,000. Delivery and installation of the new line are expected to cost an additional $100,000. Assuming Fleming’s marginal tax rate is 40%, calculate the net investment for the new line.
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