Quorum Corp. wants to replace a 5-year-old machine with a new machine that is more efficient. The old machine cost $20,000 when new and has a current book value of $8,000. Quorum can sell the old machine for $5,000. The company has a marginal tax rate of 40%. What will be the cash flow impact from the sale of the old machine on the initial outlay for a new machine? a) $3,800 b) $5,000 c) $6,200 d) $8,000
Quorum Corp. wants to replace a 5-year-old machine with a new machine that is more efficient. The old machine cost $20,000 when new and has a current book value of $8,000. Quorum can sell the old machine for $5,000. The company has a marginal tax rate of 40%. What will be the cash flow impact from the sale of the old machine on the initial outlay for a new machine? a) $3,800 b) $5,000 c) $6,200 d) $8,000
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 9P
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Quorum Corp. wants to replace a 5-year-old machine with a new machine that is more efficient. The old machine cost $20,000 when new and has a current book value of $8,000. Quorum can sell the old machine for $5,000. The company has a marginal tax rate of 40%. What will be the cash flow impact from the sale of the old machine on the initial outlay for a new machine?
- a) $3,800
- b) $5,000
- c) $6,200
- d) $8,000
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