Question

Acme Manufacturing is considering a project that requires an investment in new equipment of $3,200,000, with an additional $160,000 in shipping and installation costs. Acme estimates that its accounts receivable and inventories need to increase by $640,000 to support the new project, some of which is financed by a $256,000 increase in spontaneous liabilities (accounts payable and accruals). The total cost of Martson's new equipment is ___________ (a. $3,780,000, b. $4,212,000, c. $720,000) and consists of the price of the new equipment plus the _______________________ (a. asset's salvage value, b. assets installation, shipping, and delivery costs.

Answer 1

Cost of new equipment is $3,360,000

It consist of price of new equipment and asset's installation, shipping and delivery cost.

Step-by-step explanation:

Cost of equipment includes cost of acquisition and any installation, shipping or delivery cost.

Acme's cost of new equipment:

Acquisition cost = $3,200,000

Shipping and installation cost = $160,000

Total cost = $3,360,000

Note: This is not given in option but this is the answer as per the data given.

New equipment cost includes price of equipment plus installation, shipping and delivery cost of asset.