PDF CorpNeeds to Replace an Old Lathe with a New,more Efficient

question 14

Multiple Choice

PDF Corp.needs to replace an old lathe with a new,more efficient model.The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000.(The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000.It will cost the company $10,000 to get the new lathe to the factory and get it installed.The old machine will be sold as scrap metal for $2,000.The new machine is also being depreciated on a straight-line basis over ten years.Sales are expected to increase by $8,000 per year while operating expenses are expected to decrease by $12,000 per year.PDF's marginal tax rate is 40%.Additional working capital of $3,000 is required to maintain the new machine and higher sales level.The initial outlay for the new machine is

• A) $113,000.
• B) $112,200.
• C) $111,000.
• D) $109,800.

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Definitions:

Poison Arrowheads

Historical weapons used for hunting and warfare, often coated with natural toxins to incapacitate or kill the target.

Acetylcholine

A neurotransmitter involved in many functions including muscle activation, memory, and learning.

Black Widow Spider Venom

A potent neurotoxin produced by the black widow spider that affects the nervous system by causing excessive neurotransmitter release.

Promotes

Encourages or advances the growth, development, or progress of something.