INFORMATION: Goldfields Limited intends purchasing a new machine to replace an existing machine. The new machine will have a purchase price of R 1 200 000. Transport and installation costs for the new machine will amount to an additional R120 000. The new machine will result in an increase in working capital of R160 000. The old machine was purchased five years ago at a cost of R800 000. The machine was depreciated over its useful life of five years to a NIL book value. The old machine is expected to be sold as scrap for R60 000. At the time of its purchase the old machine required an increase in working capital of R80 000. The company is subject to a 28% tax rate. REQUIRED: The initial investment for the replacement project is: A. (R1 320 000) B. (R1200 000) C. (R1 196 800) D. (R1 356 800)

INFORMATION: Goldfields Limited intends purchasing a new machine to replace an existing machine. The new machine will have a purchase price of R 1 200 000. Transport and installation costs for the new machine will amount to an additional R120 000. The new machine will result in an increase in working capital of R160 000. The old machine was purchased five years ago at a cost of R800 000. The machine was depreciated over its useful life of five years to a NIL book value. The old machine is expected to be sold as scrap for R60 000. At the time of its purchase the old machine required an increase in working capital of R80 000. The company is subject to a 28% tax rate. REQUIRED: The initial investment for the replacement project is: A. (R1 320 000) B. (R1200 000) C. (R1 196 800) D. (R1 356 800)

Name: INFORMATION:Goldfields Limited intends purchasing a new machine to re
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Description: INFORMATION:Goldfields Limited intends purchasing a new machine to replace an existing machine. The new machine will have apurchase price of R 1 200 000. Transport and installation costs for the new machine will amount to an additionalR120 000. The

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 16P

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