Q37. A profitable company is considering the replacement of old equipment used in the manufacturing process with new, more efficient equipment. An analyst gathered the following information about the old and now equipment?

Old equipment:

Original cost                                   $40,000

Current book value                              310,000

Current market value                            $15,000

Estimated salvage value in there years              $2,500

Cost of new equipment

(including freight and installation costs of $3,000)    $83,000

Marginal tax rate for the company                 40%

Increase in net working capital required            $5,500

If the new equipment is purchased, the old machine will be sold to another company. The initial (net)

investment outlay for-the replacement project is closest to:

A.       $71,500

B.       $ 73,000

C.   $ 73,500

D.   $ 75,500

答案和详解如下：

Q37.   D    07 Modular Level 1, Vol. 3; PP.37-38  Study Session 11-47.b

The initial outlay would include the items at t=0:

Cost of equipment including freight and installation charges         $83,000

Increase in NWC                                           $5,500

Proceeds from sale of old machine                             $5,000

Tax liability from sale of old machine (15,000-10,000) ×0.4        $2,000

Initial investment outlay            

a

thx

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