Airstat Is Replacing an Old Stamping Line That Cost $80,000

question 85

Multiple Choice

Airstat is replacing an old stamping line that cost $80,000 five years ago, with a new, more efficient machine that will cost $225,000. Shipping and installation will cost an additional $20,000. The old machine has a book value of $15,000 but will be sold as scrap for $5,000. The new machine will be depreciated with a 7-year life under MACRS guidelines. With the increased production, inventories will increase $4,000, accounts receivable will increase $16,000, and accounts payable will increase $14,000. If Airstat has a marginal tax rate of 40 percent, what is the net investment?

• A) $274,000
• B) $242,000
• C) $260,000
• D) -$274,000

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Definitions:

Natural Aging Process

The gradual changes in the biological, physical, and psychological dimensions of human beings over time, not influenced by disease or environmental factors.

Narcissists

Individuals characterized by a pervasive pattern of grandiosity, a constant need for admiration, and a lack of empathy for others.

Positive Consequences

Beneficial or favorable outcomes that result from a specific action or set of actions.

Openness to Experience

A personality trait characterized by an appreciation for art, emotion, adventure, unusual ideas, imagination, curiosity, and variety of experience.