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$2.00 Multiple Choice - Cash outflows

• From Business: General-Business , Economics: General-Economics
• Closed, but you can still post tutorials
• Due on Jan. 02, 2008
• Asked on Dec 20, 2007 at 2:56:30PM

Q:

The purchase of a new piece of equipment for $20,000 is expected to reduce inventory requirements by $2,500 and raise accounts payable by $1,000 per annum. The book value and market value of the existing equipment is $5,000 and $3,000 respectively. If the firm's cost of capital is 15% and thier tax rate is 40%, the required cash outflow associated with the acquisition of a new machine is:

a. $12,700
b. $14,700
c. $ 7,700
d. $12,300

 

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