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*** Select all Correct Answers *** Widget Engineering is considering purchasing a robotic lathe. The new...
*** Select all Correct Answers ***
Widget Engineering is considering purchasing a robotic lathe. The
new lathe costs $450,000 and will save an estimated $65,000 per
year before depreciation and taxes. The new lathe will be
depreciated using the straight line method over ten years to zero
book value.
The lathe that is being replaced still has 10 years of useful life
and is being depreciated at $15,000 per year to zero book value in
ten years. It has a market value today of $110,000.
The company has spent $15,000 on research to determine if the
robotic lathe is suitable for their use. The machine will occupy
about 800 square feet of factory floor space more than the existing
lathe. Factory space in this locale currently rents for $5.00 per
square foot per month. It would be impossible for the company to
rent the floor space to an outside user. The company’s marginal tax
rate is 30%.
Compute the initial investment for this project.
Compute the Annual Incremental After-tax Cash Flows for an NPV
analysis of this project.
Group of answer choices
A. Initial Investment is $328,000
B. Initial Investment is $343,000
C. Initial Investment is $340,000
D. Initial Investment is $355,000
E. Annual Incremental After-tax Cash Flows are $45,500 per year.
F. Annual Incremental After-tax Cash Flows are $54,500 per year.
G. Annual Incremental After-tax Cash Flows are $59,000 per year.
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jeff jeffy answered 7 months agoRelated Solutions
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