Question

1. Metro Corporation will spend $1 million for special manufacturing equipment. Shipping and installation charges will amount to $175,000 and an initial increase in net working capital of $50,000 will be required. The equipment will replace an existing machine that has a salvage value of $85,000 and a book value of $140,000. If Metro has a tax rate of 21%, what is the amount of the initial outlay for this project? a) ($1,128,450) d) ($1,140,000) b) ($1,225,000) e) ($1,105,350) c) ($1,310,000) answer is A how do you get that?

Nevermind I got it!!!!!!!!! But if you want to answer it for others go ahead!

Answer 1

Machinery purchase price	$                       (1,175,000)	=-1000000-175000
Less: old machine proceeds	$                               96,550	=85000+(140000-85000)*21%
Net working capital	$                             (50,000)
Initial outlay	$         (1,128,450)