Zinc, Inc. is considering the acquisition of a new processing line. The processo

Question

Zinc, Inc. is considering the acquisition of a new processing line. The processor can be purchased for $3,750,000. It will cost $165,000 to ship and $85,250 to install the processor. A recently completed feasibility study that was performed at a cost of $65,000 indicated that the processor would produce a positive NPV. Studies have shown that employee training expenses will be $125,000. What is the total investment in the processing line for capital budgeting purposes?

A) $4,190,250
B) $4,125,250
C) $3,980,000
D) $3,875,000

Explanation / Answer

   Purchased cost          = $3,750,000    Ship cost                   =     165,000    Install cost                 =       85,250    Feasibility study cost   =       65,000    Employee training Exp =     125,000       Total cost                 =   $4,190,250    Total investment in the Processing line Capital budgeting is $4,190,250

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