Answer to Question #276122 in Financial Math for Anup

Question

1.      Should the following be ignored, or rather added or subtracted from the new machine’s purchase price when estimating initial cash outflow?

a)     The old machine is saleable at S500 in the market.

b)     Book value of the old machine is $300, it still has 1 year of depreciable life and 2 years of useful life.

c)      Replacement of the old machine with the new one will require $ 1500 additional investment in inventory

d)     Shipment and installation of the new machine at the plant site will incur $ 400

e)     Training of the machine operator will cost $ 350