Question

A firm will purchase a $400,000 machine to replace an aging machine with a book value...

A firm will purchase a $400,000 machine to replace an aging machine with a book value of $19,000. The old machine can be sold for $26,000. The new machine will have to be installed at a cost of $1,800. If the tax rate is 36%, determine the NICO.

$378,320

$176,900

$294,921

$402,520

none of the above
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Answer #1
Particulars Amount NICO
Purchase of machine $        400,000
Installation costs $            1,800
Sale proceeds $          26,000 $         (26,000)
Less: book value $         (19,000)
Gain on sale $            7,000
× tax rate 36%
Taxes paid $            2,520 $            2,520
NICO $        378,320

Answer is $378,320

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