What dollar amount be used for net original investment

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Dublin Inc. is considering replacing an old drilling machine that cost $200,000 six years ago with a new one that costs $450,000. Shipping and installation cost an additional $60,000. The old machine has been depreciated using the straight-line (SL) method with no salvage value over an estimated 8-year useful life. The old machine can be sold for $40,000 now. Management expects increases in net working capital of $30,000 (inventories up $10,000, accounts receivable up $32,000, accounts payable up $12,000) if the new machine is acquired. Durable's income tax rate is 30%- NOT 40%

Problem 1: What dollar amount should be used for the net original investment in time period 0 to conduct this replacement decision?

Option 1: $500,000

Option 2: $510,000

Option 3: $497,000

Option 4: $470,000

Reference no: EM132796734

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