Reference no: EM133085362

Question - Capital Budgeting - NE-YO Corporation is currently manufacturing laptops using traditional technology. Only one machine is used for assembling the product. With the improving economic decisions and increasing demands of the market, a more sophisticated machine costing P250,000 may be bought and used for assembling purposes. The terms of acquisition is 5/10, n/30. Additional cost such as freight and installation amounted to P10,000. If the new machine will be purchased, the old machine with book value of P5,000 may be sold for its fair value of P8,000. Other supplies used for the old machine is not necessary for the new machine and can be sold for P9,000, resulting to a loss of P2,500. Additional net working capital of P50,000 is needed for the new machine. Major repairs amounting P4,500 on the old machine will be avoided once the new machine is purchased. Major repairs are not deductible for tax purposes. Assume a tax rate of 40%. Compute the net investment.