Question
(CB CFs) You are analyzing the purchase of new equipment. Since you are not an expert on this type of equipment, you hire a consulting
(CB CFs) You are analyzing the purchase of new equipment. Since you are not an expert on this type of equipment, you hire a consulting firm to make recommendations. The consultant charged you $2903 and recommended the purchase of the latest model from ACME Corp. of America. The equipment costs $85094, and it will cost another $9693 to modify it for special use by your firm. The equipment will be depreciated on a straight-line basis over 8 years with no salvage value. You expect the equipment will be sold after 3 years for $26714. Use of the equipment will require an increase in your company's net working capital of $4775, but this $4775 will be recovered at the end of year 3. The use of the equipment will have no effect on revenues, but it is expected to save the firm $49505 per year in before-tax operating costs. Your company's marginal tax rate is 31%. What is the initial outlay required to fund this project, to the nearest dollar?
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