PDCorporation Is Considering the Purchase of a High-Speed Lathe That

question 54

Essay

P.D.Corporation is considering the purchase of a high-speed lathe that has an invoice price of $250,000.The cost to ship the lathe to P.D.'s factory is $10,000,and the existing facilities will require modifications that are expected to cost $20,000.The machine will be depreciated on a straight-line basis over its useful life of 10 years,assuming no salvage value.P.D.Corporation is planning on paying for the lathe using a line of credit at the bank that has an interest rate of 6 percent per year.The lathe is expected to increase production and sales.Sales are expected to increase by $100,000 per year.Inventory and accounts receivable balances are expected to increase by $10,000 and $20,000 respectively.Expenses to operate the lathe are $25,000 per year.P.D.'s marginal tax rate is 40%.
a.Calculate the initial outlay required to fund this project.
b.Calculate the incremental after-tax cash flow in year one of the project.

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Definitions:

Supportive Leadership Style

A leadership approach that focuses on the well-being of employees, motivating them through understanding, empathy, and encouragement.

Directive Leadership

A management style where leaders clearly communicate expectations, guidelines, and objectives, often providing a structured framework for employees to follow.

Achievement-Oriented Leadership

A leadership style focused on setting challenging goals, emphasizing excellence, and showing confidence in followers' abilities to meet high standards.

Tangible Benefits

Material or measurable advantages that result from an action, decision, or policy, often involving financial gain or physical assets.