A Company Is Looking to Purchase and Replace a Fixed

question 137

Multiple Choice

A company is looking to purchase and replace a fixed asset for $245,000. It will sell the asset that will be replaced for $46,000 but will incur a $20,000 gain upon that sale. It must also commit $30,000 of working-capital to the investment. The firm's tax rate is 35%. What is the amount of the relevant initial investment?

• A) $245,000
• B) $254,000
• C) $199,000
• D) $206,000

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Definitions:

Actual Hours

The actual number of hours worked or spent on a specific task or project, compared to planned or estimated hours.

Standard Hours

A predetermined or established amount of time within which a task or job is expected to be completed.

Units Produced

The total volume or number of items manufactured during a given period.

Standard Costs

Predetermined costs for materials, labor, and overhead used as a benchmark to measure actual performance against.