Cost of the machine for capital budgeting aims


A new machine can be purchased for $1,000,000. It will cost $65,000 to ship and $35,000 to modify the machine. A $30,000 recently completed feasibility study indicated that the firm can employ an existing factory owned by the firm, which would have otherwise been sold for $150,000. The firm will borrow $750,000 to finance the acquisition. Total interest expense for 5 years is expected to approximate $250,000. What is the investment cost of the machine for capital budgeting purposes?

a) $1,100,000

b) $1,250,000

c) $1,280,000

d) $1,530,000

e) $ 2,030,000

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Accounting Basics: Cost of the machine for capital budgeting aims
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