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.