What is the initial investment outlay for the machine

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You must evaluate a proposal to buy a new milling machine. The base price is $135,000 and shipping and installation costs would add another $8,000. The machine falls into the MACRS 3-year class and it would be sold after 3 years for $94,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $5,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $52,000 per year. The marginal ta rate is 35% and the WACC is 8%. What is the initial investment outlay for the machine for capital budgeting purposed?

Reference no: EM132602455

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