The Target Copy Company Is Contemplating the Replacement of Its

question 175

Multiple Choice

The Target Copy Company is contemplating the replacement of its old printing machine with a new model costing $60,000.The old machine,which originally cost $40,000,has 6 years of expected life remaining and a current book value of $30,000 versus a current market value of $24,000.Target's corporate tax rate is 40 percent.If Target sells the old machine at market value,what is the initial investment outlay (after-tax) for the new printing machine?

• A) −$22,180
• B) −$30,000
• C) −$33,600
• D) −$36,000
• E) −$40,000

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Definitions:

Absolute Advantage

The ability of a country or individual to produce a good or service more efficiently than other countries or individuals, using fewer resources.

Production Possibilities Frontiers

A curve depicting the maximum output combinations of two goods that can be produced given the resources and technology.

Opportunity Cost

The value of the best alternative that must be forgone when making a choice.

Chocolate Truffle

A type of chocolate confectionery, traditionally made with a chocolate ganache center coated in chocolate, cocoa powder, or chopped toasted nuts.