A Firm Is Planning a Project That Will Both Expand

question 24

Multiple Choice

A firm is planning a project that will both expand the firm's operations and replace some of the older, less efficient assets of the firm. The new assets will cost the firm $200,000 plus an additional $5,000 for delivery and $25,000 for installation. Old assets being replaced have a book value of $50,000 and can be sold pre-tax for $40,000. The new project will require additional land. The land to be used was purchased three years ago for $75,000 but could be sold today for $140,000 net of taxes. The new project will require an increase of $20,000 in net working capital immediately. What is this project's net investment? Use 40% for the effective tax rate.

• A)$350,000
• B)$281,000
• C)$390,000
• D)$346,000

---

Definitions:

Biological Problems

Issues or malfunctions related to the biological functions or structure of an organism, which can impact health or development.

Kraepelin

Emil Kraepelin was a German psychiatrist who made significant contributions to the classification of mental disorders.

Mental Disorders

Disorders characterized by significant disturbance in a person's cognition, emotional regulation, or behavior, indicative of a psychological or biological dysfunction.

Sakel

Refers to Manfred Sakel, a psychiatrist known for introducing insulin coma therapy as a treatment for schizophrenia in the 1930s.