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:

Purely Incidental

Occurring by chance and of secondary importance, without direct relevance to the main issue.

Breach of Contract

The failure to perform as specified in a contract without a lawful reason.

Donee Beneficiary

A third party who benefits from a contract in which a promisee promises to perform certain actions that benefit this third party.

Acquired Rights

are rights that employees gain as a result of working for their employer over a period, often concerning job security and benefits.