Question: QRW Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and

QRW Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life). The new lathe costs $100,000. It will cost the company $10,000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2,000. The new machine is also being depreciated on a straight-line basis over ten years. Sales are expected to increase by $8,000 per year while operating expenses are expected to decrease by $12,000 per year. QRW's marginal tax rate is 40%. Additional working capital of $3,000 is required to maintain the new machine and higher sales level. The initial outlay for the new machine is

A.$113,000.
B.$112,200.
C.$111,000.
D.$109,800.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Qrw corp. needs to replace an old lathe with a new more efficient model, the old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

QRW Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

QRW Corp. needs to replace an old lathe with a new, more efficient model . The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

Qrw corp. needs to replace an old lathe with a new more efficient model. the old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine Is being...

QRW Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchsed for $50,000 nine years ago and has a current book value of $5,000. ( The old machine is being...

17. QRW Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

AFB Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

PDF Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

AFB Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being...

Assume that you are asked to develop a Driver Assistance System (DAS) as described in the following. Driver Assistance System (DAS) DAS continuously monitors the state of the car engine for checking...

On January 1, 2020, Sheridan SpA had the following equity accounts. Share Capital-Ordinary (25 par value, 49,000 shares issued and outstanding) Share Premium-Ordinary Retained Earnings During the...

Find the average rate of change of f ( x ) = - 3 x 2 2 over each of the following intervals. ( a ) From 4 to 6 ( b ) From 1 to 3 ( c ) From - 1 to 2 ( a ) The average rate of change from 4 to 6 is (...

The effective tax rate on gain of $1 million resulting from the sale of qualified small business stock obtained in 2005 in an initial public offering and held more than five years is 14%. Do you...

Why did the Supreme Court rule in Arkansas Best that the stock of a corporation purchased by the taxpayer to protect the taxpayer's business reputation was a capital asset?

Four years ago. Susan loaned $7900 to her friend Joe. During the current year the $7600 loan is considered worthless. Explain how Susan should treat the worthless debt for tax purposes.

Amy has LTCGs that are taxed at different tax rates, 15%, 25% and 28%. She also has NSTCLs that amount to less than her NLTCG. The procedure for offsetting the NSTCL against the LTCGs is favorable to...

In 2002, Florence purchased 30 acres of land. She has not used the land for business purposes or made any substantial improvements to the property. During the current year, she subdivides the land...

Tori and some other childeen experimented with balls to see which ones rolled. First using a piece of cardboard to use as a ramp, they angled it on a block to the floor to test the balls. Then Tori...

Choose a business you would like to start or own. If you are writing a business plan for this course, include this assignment in your business plan. Using graph paper (or simple architectural...

From the information you have been provided, and considering the advantages and disadvantages of the different types of locations mentioned in this chapter, where would you recommend that Jodi...

The old adage location, location, location applies as well to cyberspace as it does to brick-and-mortar businesses. How does an Internet-based business influence its location? Which of the principles...