Finding the net initial outlay

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The Hart Medical Supplies Company is thinking of replacing a machine that presently produces the pacemakers they sell. The existing machine cost $150,000 three years ago and is being depreciated (straight line) to a salvage value of $40,000 seven years from now. It could be sold today for $100,000. The new machine would cost $ 200,000 and would be depreciated (straight line) to a salvage value of $60,000 ten years from now. The cost of training employees to use the new machine would be $5,000 and installation costs for the new machine would be $3,000. Finally, the new machine would necessitate an increase in working capital of $10,000. Hart's marginal tax rate is 25%.

Required: Find the net initial outlay associated with the replacement of the old machine.

Reference no: EM132949626

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