QRW CorpNeeds to Replace an Old Lathe with a New,more Efficient

question 93

Multiple Choice

QRW Corp.needs to replace an old lathe with a new,more efficient model.The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000.(The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000.It will cost the company $10,000 to get the new lathe to the factory and get it installed.The old machine will be sold as scrap metal for $2,000.The new machine is also being depreciated on a straight-line basis over ten years.Sales are expected to increase by $8,000 per year while operating expenses are expected to decrease by $12,000 per year.QRW's marginal tax rate is 40%.Additional working capital of $3,000 is required to maintain the new machine and higher sales level.The initial outlay for the new machine is

• A) $113,000.
• B) $112,200.
• C) $111,000.
• D) $109,800.

---

Definitions:

Series of Events

A series of events is a sequence of occurrences, actions, or activities that are related or connected in some manner, often leading to a particular outcome.

Graphics

Visual elements such as images, charts, and diagrams used to represent information or data.

Gantt Chart

A visual project management tool that displays tasks or activities against time.

Pournelle Chart

A graphical representation used to categorize political ideologies based on two axes, often freedom vs. control and rationalism vs. irrationalism.