Question

Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,600,000, with an additional $180,000 in shipping and installation costs. Marston estimates that its accounts reveivable and inventories need to increase by $720,000 to support the new project, some of which is financed by $288,000 increase in spontaneous liabilites (accounts payable and accruals).

The total cost of Martson's new equipment is ___________
a. $3,780,000
b. $4,212,000
c. $720,000

Answer 1

a. $3,780,000

Step-by-step explanation:

According to the scenario, calculation of the given data are as follows

New equipment = $3,600,000

Shipping and installation = $180,000

We can calculate the total cost of Martson's new equipment by using following formula,

Total Cost = New equipment cost + Shipping and Installation cost

By putting the value, we get

Total Cost = $3,600,000 + $180,000

= $3,780,000