2D1B AGC COMPANY IS CONSIDERING AN EQUIPMENT UPGRADE. AGC USES DISCO...

298.

CSO: 2D1b

LOS: 2D1b

AGC Company is considering an equipment upgrade. AGC uses discounted cash flow

(DCF) analysis in evaluating capital investments and has an effective tax rate of 40%.

Selected data developed by AGC is as follows.

Existing

New

Equipment

Equipment

Original cost

$50,000

$95,000

Accumulated depreciation

45,000

-

Current market value

3,000

95,000

Accounts receivable

6,000

8,000

Accounts payable

2,100

2,500

Based on this information, what is the initial investment for a DCF analysis of this

proposed upgrade?

a.

$92,400.

b.

$92,800.

c.

$95,800.

d.

$96,200.