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.

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Definitions:

Nurture

The process of caring for and encouraging the growth or development of someone or something.

After Conception

Refers to the period of time following the fertilization of an egg by a sperm, marking the beginning of pregnancy.

Differential Sensitivity

The concept that individuals vary in their responsiveness to the same environmental stimuli.