Table $9\mathrm{.}3$

Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $$50,000$ and

requires installation costs of $$2,500.$ This outlay would be partially offset by the sale of an existing gluer. The existing gluer

originally cost $$10,000$ and is four years old. It is being depreciated under MACRS using a five$-$year recovery schedule and

can currently be sold for $$15,000.$ The existing gluer has a remaining useful life of five years. If held until year $5,$ the existing

machine's market value would be zero. Over its five$-$year life, the new machine should reduce operating costs $($excluding

depreciation$)$ by $$17,000$ per year. Training costs of employees who will operate the new machine will be a one$-$time cost of

$$5,000$ which should be included in the initial outlay. The new machine will be depreciated under MACRS using a

five$-$year recovery period. The firm has a $12$ percent cost of capital and a $40$ percent tax on ordinary income and capital

gains.

The initial outlay for this project is $($See Table $9\mathrm{.}3)$

A$)$ $$35,140.$

B$)$ $$40,320.$

C$)$ $$47,820.$

D$)$ $$42,820.$