19 A $89,000 machine with a 7-year class life was purchased 3 years ago. The machine will now be sold for $31,000 and replaced with a new machine costing $65,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project? NOTE-- ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE DOLLAR SIGN.

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter10: Project Cash Flows And Risk
Section: Chapter Questions
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19
A $89,000 machine with a 7-year class life was purchased 3 years ago. The machine will now be
sold for $31,000 and replaced with a new machine costing $65,000, with a 5-year class life. The
new machine will not increase sales, but will decrease operating costs by $16,000 per year.
Simplified straight line depreciation is employed for both machines, and the marginal corporate
tax rate is 34 percent. What is the initial outlay for the project? NOTE-- ALTHOUGH THE
INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN
OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE
DOLLAR SIGN.
Transcribed Image Text:19 A $89,000 machine with a 7-year class life was purchased 3 years ago. The machine will now be sold for $31,000 and replaced with a new machine costing $65,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project? NOTE-- ALTHOUGH THE INITIAL OUTLAY IS NEGATIVE, PLEASE ENTER YOUR ANSWER AS A POSITIVE SIGN. IN OTHER WORDS, IF YOUR ANSWER IS -10,000, ENTER IT AS 10,000. DO NOT ENTER THE DOLLAR SIGN.
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