Your Company Is Considering Replacing an Old Steel Cutting Machine

Multiple Choice

Your company is considering replacing an old steel cutting machine with a new one.Two months ago,you sent the company engineer to a training seminar demonstrating the new machine's operation and efficiency.The $2,500 cost for this training session has already been paid.If the new machine is purchased,it would require $5,000 in installation and modification costs to make it suitable for operation in your factory.The old machine originally cost $50,000 five years ago and has been depreciated by $7,000 per year for five years up to now.The new machine will cost $75,000 before installation and modification.It will be depreciated by $5,000 per year.The old machine can be sold today for $10,000.The marginal tax rate for the firm is 40%.Compute the relevant initial outlay in this capital budgeting decision.

A) $72,500
B) $68,000
C) $70,500
D) $78,000