AFB,Inc.requires an investment in equipment of $600,000 to replace existing equipment.The existing equipment will produce after-tax salvage value of $70,000.Net working capital requirements are increased by $50,000.What is the total cash outflow at time zero?

Question

Quizplus · Accepted Answer

The total cash outflow at time zero is calculated by adding the investment in new equipment ($600,000) and the increase in net working capital ($50,000), then subtracting the after-tax salvage value of the existing equipment ($70,000). This results in $600,000 + $50,000 - $70,000 = $580,000.

AFB,IncRequires an Investment in Equipment of $600,000 to Replace Existing