AFB,IncIs Considering Replacing an Old Machine with a New One

question 84

Multiple Choice

AFB,Inc.is considering replacing an old machine with a new one.Two months ago their chief engineer completed a training seminar on the new machine's operation and efficiency.The $3,000 cost for this training session has already been paid.If the new machine is purchased,it would require $7,000 in installation and modification costs to make it suitable for operation in the factory.The old machine originally cost $80,000 five years ago and is being depreciated by $10,000 per year.The new machine will cost $100,000 before installation and modification.It will be depreciated by $12,000 per year.The old machine can be sold today for $12,000.The marginal tax rate for the firm is 40%.Compute the relevant initial outlay in this capital budgeting decision.

• A) $79,500
• B) $97,800
• C) $90,800
• D) $87,800

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Definitions:

Deliberate System

A cognitive process that is slow, analytical, and effortful, often associated with rational decision-making.

Automatic System

Cognitive processing that occurs subconsciously and effortlessly, often responsible for quick judgments and reactions.

Automatic System

An unconscious, fast, and often involuntary process of information processing in the brain, which contrasts with deliberate and effortful processing.

Socially Acceptable

Behaviors or practices that are widely approved of within a society or cultural group.