J.B. Enterprises purchased a new molding machine for $75,000. The company paid $

Question

J.B. Enterprises purchased a new molding machine for $75,000. The company paid $6,000 for shipping and another $4,000 to get the machine integrated with the company's existing assets. J.B. must maintain a supply of special lubricating oil just in case the machine breaks down. The company purchased a supply of oil for $2,000. The machine is to be depreciated on a straight-line basis over its expected useful life of 10 years. J.B. is replacing an old machine that was purchased 7 years ago for $50,000. The old machine was being depreciated on a straight-line basis over a ten year expected useful life. The machine was sold for $10,000. J.B.'s marginal tax rate is 40%. What is the amount of the initial outlay? A)$85,000 B)$77,000 C)$75,000 D)$81,000

Explanation / Answer

initial outlay = 75000+6000+4000

=$85000 ---option(A)

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