7. Hydrangea Co. is evaluating the possible acquisition of a new machine to replace an existing machine.
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Question:
7. Hydrangea Co. is evaluating the possible acquisition of a new machine to replace an existing machine. The new machine will cost $1,796,300. Freight and installation necessary to put the machine in service will cost $140,000. The firm expects that, due to increased sales, inventory and accounts receivable will increase by $130,000 and $120,000, respectively. Accounts payable are expected to increase by $150,000. The firm thinks that it could sell the existing machine for $180,000. The current book value of the existing machine is $130,000 and the firms tax rate is 40%. What is Hydrangea's initial outlay for this replacement project?
Group of answer choices
a. $1,845,000
b. $1,860,300
c. $1,876,300
d. $1,905,000
e. $1,916,300
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