In January 2008, Tim's Gyms, Inc. owned machines valued at $1 million. During the year, the market value of the equipment fell by 30 percent. During 2008, Tim spent $200,000 on new machines. During 2008, Tim's gross investment totalled
A) $200,000
B) $900,000.
C) $1 million.
D) $300,000.

Question

Quizplus · Accepted Answer

Gross investment refers to the total amount spent on new capital, which in this case is the $200,000 spent on new machines. The decrease in market value of existing equipment does not affect the calculation of gross investment.