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:

Hard Physical Work

Labor-intensive tasks requiring significant physical effort and stamina, often associated with manual occupations.

Linked Lives

The concept that individuals' lives are interconnected, implying that the life course of one individual can significantly affect another's, often discussed within families and communities.

Financial Aid

Financial assistance provided to students to help cover the cost of their education, which can come in the form of grants, scholarships, loans, and work-study programs.

Cohabitation

An arrangement in which a couple lives together in a committed romantic relationship but are not formally married.