answer must be negative The Hot Air Company is contemplating the replacement of

Question

answer must be negative

The Hot Air Company is contemplating the replacement of its old printing machine with a new model costing s 6 0,000. The old machine, which originally cost $40,000, has 6 years of expected life remaining and a current book value of $ 24,000 versus a current market value of S 20,000. The firm's corporate tax rate is 40 percent. If the company sells the old machine at market value, what is the initial after-tax outlay for the new printing machine? Cash outflow must be a negative number! Round it a whole dollar and do not include the S sign.

Explanation / Answer

a. Initial After Tax Outlay = - Cost of Machine + Sale of Machine + tax Benefit on Loss of sale of machine

Initial After Tax Outlay = - $60000 + $20000 + $4000 * 40%

Initial After Tax Outlay = - 38400

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