Ten Years Ago J-Bar Company Purchased a Lathe for $250,000

question 73

Multiple Choice

Ten years ago J-Bar Company purchased a lathe for $250,000. It was being depreciated on a straight-line basis to an estimated $25,000 salvage value over a 15-year period. The firm is considering selling the old lathe and purchasing a new one. The new lathe would cost $500,000. The firm's marginal tax rate 40 percent. Determine the net investment required to purchase the new lathe, if the old lathe is sold for $100,000.

• A) $380,000
• B) $397,500
• C) $400,000
• D) $418,000