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:

Placenta

An organ that develops in the uterus during pregnancy, providing oxygen and nutrients to and removing waste from the fetus through the blood supply.

Uterine Cycle

Cycle that runs concurrently with the ovarian cycle; it prepares the uterus to receive a developing zygote.

Ovulation

Bursting of a follicle when a secondary oocyte is released from the ovary; if fertilization occurs, the secondary oocyte becomes an egg.

28-Day

Often associated with a full cycle of the moon or a typical menstrual cycle length, marked by changes or events occurring every 28 days.