Author Question: QRW Corp needs to replace an old lathe with a new, more efficient model. The old lathe was ... (Read 96 times)

jenna1 · **on:** Jul 10, 2018

QRW Corp needs to replace an old lathe with a new, more efficient model. The old lathe was
purchased for 50,000 nine years ago and has a current book value of 5,000.

(The old machine is
being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs 100,000.
It will cost the company 10,000 to get the new lathe to the factory and get it installed. The old
machine will be sold as scrap metal for 2,000. The new machine is also being depreciated on a
straight-line basis over ten years. Sales are expected to increase by 8,000 per year while operating
expenses are expected to decrease by 12,000 per year. QRW's marginal tax rate is 40. Additional
working capital of 3,000 is required to maintain the new machine and higher sales level. The initia
outlay for the new machine is
A) 111,000. B) 113,000. C) 109,800. D) 112,200.

Question 2

In a lockbox system, customer payments are collected directly by the bank and deposited
immediately in the corporation's account.

Indicate whether the statement is true or false