AFB,IncIs Considering Replacing an Old Machine with a New One

question 84

Multiple Choice

AFB,Inc.is considering replacing an old machine with a new one.Two months ago their chief engineer completed a training seminar on the new machine's operation and efficiency.The $3,000 cost for this training session has already been paid.If the new machine is purchased,it would require $7,000 in installation and modification costs to make it suitable for operation in the factory.The old machine originally cost $80,000 five years ago and is being depreciated by $10,000 per year.The new machine will cost $100,000 before installation and modification.It will be depreciated by $12,000 per year.The old machine can be sold today for $12,000.The marginal tax rate for the firm is 40%.Compute the relevant initial outlay in this capital budgeting decision.

• A) $79,500
• B) $97,800
• C) $90,800
• D) $87,800

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Definitions:

Thalamus

A major part of the brain acting as a principal relay station for sensory information flowing to the cortex.

Broca's Area

A region in the frontal lobe of the dominant hemisphere (usually the left) of the brain with functions linked to speech production.

Functional Magnetic Resonance Imaging

An imaging technique that measures brain activity by detecting changes associated with blood flow, used to understand brain function.

Positron Emission Tomography

A nuclear medicine functional imaging technique that is used to observe metabolic processes in the body as an aid to the diagnosis of disease.