question archive Capital Budgeting Net Initial Investment 1
Capital Budgeting Net Initial Investment 1
Subject:AccountingPrice: Bought3
Capital Budgeting Net Initial Investment 1. The management of Maingat Company plans to replace a sorting machine that was acquired several years ago at cost P60,000. The machine has been depreciated to its residual value of P10,000. A new sorter can be purchased for P96,000. The dealer will grant a trade-in allowance of P16,000 on the old machine. If a new machine is not purchased, Maingat Company will spend P10,000 to repair the old machine. Gains and losses on trade-in transactions are not subject to income taxes. The cost to repair the old machine can deducted in computing income taxes. Income taxes are estimated at 40% of the income subject to tax. Additional working capital required is P50,000. Required: compute the net initial investment in this project.
