Firm X Is Considering the Replacement of an Old Machine

question 94

Multiple Choice

Firm X is considering the replacement of an old machine with one that has a purchase price of $70,000. The current market value of the old machine is $18,000 but the book value is $32,000. The firm's combined tax rate is 30%. What is the net cash outflow for the new machine after considering the sale of the old machine? Disregard the effect of depreciation of the new machine if acquired.

• A) $47,800
• B) $70,000
• C) $52,000
• D) $40,100