A New Machine Can Be Purchased for $1,200,000

question 118

Multiple Choice

A new machine can be purchased for $1,200,000.It will cost $35,000 to ship and $15,000 to modify the machine.A $12,000 recently completed feasibility study indicated that the firm can employ an existing factory owned by the firm,which would have otherwise been sold for $180,000.The firm will borrow $750,000 to finance the acquisition.Total interest expense for 5-years is expected to approximate $350,000.What is the investment cost of the machine for capital budgeting purposes?

• A) $2,180,000
• B) $1,780,000
• C) $1,442,000
• D) $1,430,000

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