Initial cash outlay necessary to replace the equipment


Problem:

A company is evaluating the possible replacement of equipment. New equipment would cost $106,975, and sales tax on the purchase would be 3%. Both the purchase price and sales tax would be capitalized. The old equipment had an original purchase price of $70,000 and accumulated depreciation of $32,000 has been taken. The old equipment can be sold currently for $27,148, and the company pays taxes at a rate of 37%.

Required:

Question: What is the initial cash outlay necessary to replace the existing equipment?

Note: Be sure to show how you arrived at your answer.

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Finance Basics: Initial cash outlay necessary to replace the equipment
Reference No:- TGS0893306

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