PDF Corp needs to replace an old lathe with a new one more efficient model. The
ID: 2667395 • Letter: P
Question
PDF Corp needs to replace an old lathe with a new one more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5000 the old machine is being depreciated on a straight line basis over 10 years useful life. The new lathe cost $100000 it will cost the company $10000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2000 the new machine is Also being depreciated on s straight line basis over ten years sales are expected to increase by $8000 per year while operating expenses are expected to decrease by $12000 per year PDFs marginal tax rate is 40% additional working capital of $3000 is required to maintain the new machine and higher dales level. The new lathe is expected to be sold for $5000 at the end of the projects ten year life. What is the projects terminal cash flow?A. $8000
B. $6000
C. $5000
D. $3000
Explanation / Answer
PDF Corp needs to replace an old lathe with a new one more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5000 the old machine is being depreciated on a straight line basis over 10 years useful life. The new lathe cost $100000 it will cost the company $10000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2000 the new machine is Also being depreciated on s straight line basis over ten years sales are expected to increase by $8000 per year while operating expenses are expected to decrease by $12000 per year PDFs marginal tax rate is 40% additional working capital of $3000 is required to maintain the new machine and higher dales level. The new lathe is expected to be sold for $5000 at the end of the projects ten year life. What is the projects terminal cash flow?
A. $8000
B. $6000
C. $5000
D. $3000
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