Fact Pattern: Verla Industries is trying to decide which one of the following two options to pursue. Either option will take effect on January 1st of the next year Option One Acquire a New Finishing Machine The cost of the machine is $1,000,000, and it will have a useful life of 5 years. Net pre-tax cash flows arising fronm savings in labor costs will amount to $100,000 per year for 5 years. Depreciation expense will be calculated using the straight-line method for both financial and tax reporting purposes. As an incentive to purchase, Verla will receive a trade-in allowance of $50,000 on its current fully depreciated finishing machine. Option Two- Outsource the Finishing Work Verla can outsource the work to LM, Inc., at a cost of $200,000 per year for 5 years, If it outsources. Verla will scrap its current fully depreciated finishing machine. Vera's effective income tax rate is 40%. The weighted-average cost of capital is 10%. The firm's net present value of acquiring the new finishing machine is A. $434,424 net cash outflow O B. $229,710 net cash outflow C. $267.620 net cash outflow OD. $369,260-net cash outflow Directions: Select the best answer. Next Previous