Asked by
Melat Ayalew
on Dec 20, 2024Verified
Anderson Clayton will purchase a new pellet mill that replaces an older, less efficient, mill. The new mill costs $360,000 and shipping costs are $10,000. Improving the steam lines to the new mill will cost an additional $22,000. The old mill has a book value of $25,000 and can be sold for $12,000. The installation of the new mill will cause inventories to increase by $8,000, accounts receivable will go up $20,000, and accounts payable will increase $10,000. If Anderson Clayton has a marginal tax rate of 40%, what is the Net Investment for the new mill?
A) $392,800
B) $412,800
C) $374,800
D) $398,000
Marginal Tax Rate
The rate at which an additional dollar of income would be taxed, pertaining to the highest tax bracket of an individual or entity.
Pellet Mill
A machine or device for producing pellets from powdered material by pressing, forming, or extruding it, commonly used in the manufacturing of animal feed or wood pellets.
- Ascertain and calculate the net investment necessary for projects within capital budgeting.
Verified Answer
MB
Learning Objectives
- Ascertain and calculate the net investment necessary for projects within capital budgeting.
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