Durable Inc

question 77

Essay

Durable Inc.is considering replacing an old drilling machine that cost $200,000 six years ago with a new one that costs $450,000.Shipping and installation cost an additional $60,000.The old machine has been depreciated using straight-line method with no salvage value over an estimated 8-year useful life.The old machine can be sold for $40,000 now or $10,000 in two years.Management expects increases in inventories of $10,000, accounts receivable of $32,000, and accounts payable of $12,000 if the new machine is acquired.Durable's income tax rate is expected to be 30 percent over the years affected by the investment.
Required: What is Durable's net initial investment (i.e., its after-tax initial cash outlay for the machine)?

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Definitions:

Subagent

An agent appointed by another agent with the original principal's authorization, typically to help perform some duty or function.

Apparent Authority

The appearance or assumption of authority based on the actions or representations of the principal.

Misrepresented Warranty

A false or misleading statement about the condition or functionality of a product that can lead to a breach of warranty claim.

Respondeat Superior

A legal doctrine that holds an employer liable for the actions of an employee when the actions occur within the scope of employment.