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Compute the net investment of the new machine

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Reference no: EM132971938

Question - The Goodwill Corp plans to acquire a new machinery costing P900,000 to replace the old machine that is still being used. Freight and charges on the delivery of new machine are estimated at P25,000 and it will cost P22,000 to install. Special attachment to be used with this unit will be needed and will cost P55,000. If the new machine is acquired, operations will be expanded and this will require additional working capital of P110,000. The old machine has a net book value of P60,000 and will be sold for P22,000. If the new machine is not purchased, the old machine must be overhauled at a cost of P120,000. This cost is deductible for tax purposes in the year incurred. Tax rate is 25%. Compute the net investment of the new machine for decision making purposes. Justify.

Reference no: EM132971938

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