P.D.Corporation is considering the purchase of a high-speed lathe that has an invoice price of $250,000.The cost to ship the lathe to P.D.'s factory is $10,000,and the existing facilities will require modifications that are expected to cost $20,000.The machine will be depreciated on a straight-line basis over its useful life of 10 years,assuming no salvage value.P.D.Corporation is planning on paying for the lathe using a line of credit at the bank that has an interest rate of 6 percent per year.The lathe is expected to increase production and sales.Sales are expected to increase by $100,000 per year.Inventory and accounts receivable balances are expected to increase by $10,000 and $20,000 respectively.Expenses to operate the lathe are $25,000 per year.P.D.'s marginal tax rate is 40%.
a.Calculate the initial outlay required to fund this project.
b.Calculate the incremental after-tax cash flow in year one of the project.

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The Answer of P.D.Corporation is considering the purchase of a high-speed lathe that has an invoice price of $250,000.The cost to ship the lathe to P.D.'s factory is $10,000,and the existing facilities will require modifications that are expected to cost $20,000.The machine will be depreciated on a straight-line basis over its useful life of 10 years,assuming no salvage value.P.D.Corporation is planning on paying for the lathe using a line of credit at the bank that has an interest rate of 6 percent per year.The lathe is expected to increase production and sales.Sales are expected to increase by $100,000 per year.Inventory and accounts receivable balances are expected to increase by $10,000 and $20,000 respectively.Expenses to operate the lathe are $25,000 per year.P.D.'s marginal tax rate is 40%.
a.Calculate the initial outlay required to fund this project.
b.Calculate the incremental after-tax cash flow in year one of the project.

PDCorporation Is Considering the Purchase of a High-Speed Lathe That