The tri-star company currently use an old lathe that was purchase 2 years ago at $6000. This machine is being depreciatin on a MACRS five year (20%, 32%, 19%, 12%, 11%, 6%). The current market value for this machine is $3,000. The proposed new improved lathe cost $10,000 and additional installation fee of $1,000. The new lathe would require that inventories be increased by $800 and account receivable increase $600, but accounts payable would simultaneously increase by $700. Tri-Star's marginal federal-plus-state tax rate is 30%. What is the initial investment of company when evaluating the replacement of old lathe by the new one?

$8,736

Explanation:

initial investment = capital expenditures (machine's purchase cost + installation costs) + any increase in working capital - disposal of old machine

capital expenditures  = $10,000 + $1,000 = $11,000

after tax salvage value = market value + taxes on disposal

the current book value of the old machine = $6,000 - $1,200 - $1,920 = $2,880

taxes on salvage value = (book value - market value) x tax rate = ($2,880 - $3,000) x 30% = -$36

after tax salvage value = $3,000 - $36 = $2,964

net working capital = current liabilities - current assets

change in working capital = $800 + $600 - $700 = $700

initial investment = $11,000 + $700 - $2,964 = $8,736

if you do not file your taxes you will not have a job, and you credit rate will go down.

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know