The Director of Capital Budgeting of Capital Assets Corp. is considering the acquisition of a new high speed photocopy machine. The photocopy machine is priced at $85,000 and would require $2,000 in transportation costs and $4,000 for installation. The equipment will have a useful life of 5 years. The proposal will require that Capital Assets Corp. send a technician for training at a cost of $5,000. The firm's marginal tax rate is 40 percent. How much is the initial cash outlay of the photocopy machine?
A) $64,000
B) $77,000
C) $81,000
D) $96,000

Question

Quizplus · Accepted Answer

The initial cash outlay for the photocopy machine includes the purchase price, transportation costs, installation costs, and training costs for the technician. Therefore, the total initial cash outlay is $85,000 (purchase price) + $2,000 (transportation) + $4,000 (installation) + $5,000 (training) = $96,000. Taxes are not directly considered in calculating the initial cash outlay.