To calculate the net investment for the new line, we need to consider the following costs:
1. Cost of the new filling line: $1,200,000
2. Delivery/installation cost: $100,000
To determine the net investment, we need to subtract any proceeds from selling the old line, as well as any tax savings from disposing of the old line.
Proceeds from selling the old line:
Sale value: $150,000
Tax savings from disposing of the old line:
Book value: $200,000
Tax rate: 40%
Tax savings = Book value * Tax rate
Tax savings = $200,000 * 40% = $80,000
Net investment = (Cost of new line + Delivery/installation cost) - (Sale value of old line - Tax savings)
Net investment = ($1,200,000 + $100,000) - ($150,000 - $80,000)
Net investment = $1,300,000 - $70,000
Net investment = $1,230,000
Therefore, the net investment for the new filling line would be $1,230,000.