Question: A project to replace an old machine with a new one is under consideration. The new machine costs 1500 and requires an additional working capital

A project to replace an old machine with a new one is under consideration. The new machine costs 1500 and requires an additional working capital investment of 750. The old machine is expected to have a 750 salvage value. Calculate the initial outlay of this replacement project assuming the book value of the old asset is 1500. The firm's marginal tax rate is 55%.

a. $1,087.50

b. $337.50

c. $1837.50

d. $1912.50

e. none of the above

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