What is the initial outlay for the project

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Nuff Folding Box? Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs? $50,000 and requires installation costs of? $2,500. This outlay would be partially offset by the sale of an existing gluer. The existing gluer originally cost? $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for? $15,000. The existing gluer has a remaining useful life of five years. If held until year? 5, the existing? machine's market value would be zero. Over its five-year ?life, the new machine should reduce operating costs? (excluding depreciation) by? $17,000 per year. Training costs of employees who will operate the new machine will be a one-time cost of? $5,000 which should be included in the initial outlay. The new machine will be depreciated under MACRS using a five-year recovery period. The firm has a 12 percent cost of capital and a 40 percent tax on ordinary income and capital gains.

Problem 1: The initial outlay for this project is? ________.

A. ?$40,320
B. ?$42,820
C. ?$35,140
D. ?$47,820

Reference no: EM132943302

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