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

question 20

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 new lathe is expected to be sold for $5,000 at the end of the project's ten-year life.What is the incremental free cash flow during years 2 through 10 of the project?

• A) $13,600
• B) $14,400
• C) $15,800
• D) $16,400

---

Definitions:

Stratified Columnar Epithelium

A type of epithelial tissue composed of several layers of column-shaped cells, designed to protect or secrete substances.

Oblique Section

A type of anatomical slice or section that is cut at an angle to the main axis of an organ or part of the body, providing a view that is between transverse and longitudinal.

Histological Sections

Histological sections are thin slices of tissue prepared for examination under a microscope to study the microanatomy of cells and tissues.

Tissue

Groups of cells with similar structures and functions that work together to perform specific activities in the body.