Jones Crusher Company Is Evaluating the Proposed Acquisition of a New

question 82

Multiple Choice

Jones Crusher Company is evaluating the proposed acquisition of a new machine.The machine will cost $190,000,and it will cost another $33,000 to modify it for special use by the firm.The machine falls into the MACRS 3-year class,and it will be sold after 3 years of use for $110,000.The machine will require an increase in net working capital of $9,000 and will have no effect on revenues,but is expected to save the firm $90,000 per year in before-tax operating costs,mainly labour.The company's marginal tax rate is 40%.What is the initial cash flow for the project?

• A) -$42,000
• B) -$190,000
• C) -$199,000
• D) -$223,000
• E) -$232,000

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