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D. LISP Inc. is planning to purchase a new mixer for $50,000. The new equipment will...

D. LISP Inc. is planning to purchase a new mixer for $50,000. The new equipment will replace an older mixer that has been fully depreciated to $0 but has a disposal value of $5,000. Compute the net investment required for this project. Assume a marginal tax rate of 40%.

Please show your work, thank you.

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Answer #1

Net investment required for this project = $47000

Explanation;

Cost of new mixer = $50000

Salvage value = $5000

Tax rate = 40%

Hence salvage value after tax ($5000 * 0.6) = $3000

Thus, Net investment required for this project ($50000 – $3000) = $47000

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