Durable Inc

Essay

Durable Inc.is considering replacing an old drilling machine that cost $200,000 six years ago with a new one that costs $450,000.Shipping and installation cost an additional $60,000.The old machine has been depreciated using straight-line method with no salvage value over an estimated 8-year useful life.The old machine can be sold for $40,000 now or $10,000 in two years.Management expects increases in inventories of $10,000, accounts receivable of $32,000, and accounts payable of $12,000 if the new machine is acquired.Durable's income tax rate is expected to be 30 percent over the years affected by the investment.
Required: What is Durable's net initial investment (i.e., its after-tax initial cash outlay for the machine)?