Spencers Majestic Foods Is Considering the Replacement of Some Old

Multiple Choice

Spencers Majestic Foods is considering the replacement of some old equipment. The new equipment will cost $300,000 including delivery and installation. The old equipment to be replaced has a book value of $100,000 and can be sold pre-tax for $120,000. If the firm's effective tax rate is 40%, compute the net investment.

A) $192,000
B) $188,000
C) $180,000
D) $228,000