Problem:
J.B. Enterprises purchased a new molding machine for $85,000. The company paid $8,000 for shipping and another $7,000 to get the machine integrated with the company's existing assets. J.B. must maintain a supply of special lubricating oil just in case the machine breaks down. The company purchased a supply of oil for $4,000. The machine is to be depreciated on a straight-line basis over its expected useful life of 8 years. J.B. is replacing an old machine that was purchased 6 years ago for $50,000. The old machine was being depreciated on a straight-line basis over a ten year expected useful life. The machine was sold for $15,000. J.B.'s marginal tax rate is 40%.
Required:
Question: What is the amount of the initial outlay?
Choose one:
- $89,000
- $87,000
- $91,000
- $85,000
Note: Please provide through step by step calculations.