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.