Question
Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five
Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of five years it is believed that the machine could be sold for $15,000. The current machine being used was purchased 3 years ago at a cost of $50,000 and it is being depreciated down to zero over its 5 year life. The current machine's salvage value now is $10,000. The new machine would increase EBDT by $42,000 annually. Builtrites marginal tax rate is 34%.
What is the Initial Investment associated with the purchase of this machine?
A. $41,360
B. $42,580
C. $44,090
D. $46,600
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