Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of five years it is believed that the machine could be sold for $15,000. The current machine being used was purchased 2 years ago at a cost of $50,000 and it is being depreciated down to zero over its 5 year life. The current machine's salvage value now is $20,000. The new machine would increase EBOT by $42,000 annually and would require an additional $3000 in inventory. Builtrite's marginal tax rate is 34% What is the Initial Investment associated with the purchase of this machine? O $38,640 O $36,600 O$34,600 O $39,600
Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of five years it is believed that the machine could be sold for $15,000. The current machine being used was purchased 2 years ago at a cost of $50,000 and it is being depreciated down to zero over its 5 year life. The current machine's salvage value now is $20,000. The new machine would increase EBOT by $42,000 annually and would require an additional $3000 in inventory. Builtrite's marginal tax rate is 34% What is the Initial Investment associated with the purchase of this machine? O $38,640 O $36,600 O$34,600 O $39,600
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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