The Target Copy Company Is Contemplating the Replacement of Its

question 175

Multiple Choice

The Target Copy Company is contemplating the replacement of its old printing machine with a new model costing $60,000.The old machine,which originally cost $40,000,has 6 years of expected life remaining and a current book value of $30,000 versus a current market value of $24,000.Target's corporate tax rate is 40 percent.If Target sells the old machine at market value,what is the initial investment outlay (after-tax) for the new printing machine?

• A) −$22,180
• B) −$30,000
• C) −$33,600
• D) −$36,000
• E) −$40,000

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Definitions:

Cash Dividend

A cash dividend refers to a distribution of a company's earnings to its shareholders as cash.

Total Liabilities

The combined financial obligations or debts a company owes to external parties.

Financing Activities

Transactions and events where cash is raised for the purpose of running the business, acquiring assets, or returning value to shareholders.

Cash Flow

The net amount of cash and cash equivalents being transferred into and out of a business.