Asked by
Brandon Smith
on Dec 20, 2024
Verified
LISP Inc. is planning to purchase a new mixer/dubber for $50,000. The new equipment will replace an older mixer that has been fully depreciated but has a salvage value of $5,000. Compute the net investment required for this project. Assume a marginal tax rate of 40 percent.
A) $47,000
B) $45,000
C) $48,000
D) None of the above
Marginal Tax Rate
The rate of tax that applies to the last dollar of the taxpayer's income, affecting additional income earned.
Salvage Value
The projected value at which an asset can be sold after its usage period has ended.
Net Investment
The total amount of money spent on acquiring or maintaining fixed assets after accounting for depreciation.
- Achieve proficiency in determining and computing net investment in the context of capital budgeting projects.
- Evaluate the financial implications of replacing existing equipment with new equipment, including the calculation of net cash flows.
Verified Answer
CB
Learning Objectives
- Achieve proficiency in determining and computing net investment in the context of capital budgeting projects.
- Evaluate the financial implications of replacing existing equipment with new equipment, including the calculation of net cash flows.