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Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3 years ago at an installed cost of $20,300​; it was being depreciated under MACRS using a​ 5-year recovery period.​ (See table attached) for the applicable depreciation​ percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,900 and requires $4,900 in installation​ costs; it will be depreciated using a​ 5-year recovery period under MACRS. The existing machine can currently be sold for $25,800 without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of a new grading machine.

Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3 years ago at an installed cost of $20,300​; it was being depreciated under MACRS using a​ 5-year recovery period.​ (See table attached) for the applicable depreciation​ percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,900 and requires $4,900 in installation​ costs; it will be depreciated using a​ 5-year recovery period under MACRS. The existing machine can currently be sold for $25,800 without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of a new grading machine.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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 Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 3

years ago at an installed cost of $20,300​; it was being depreciated under MACRS using a​ 5-year recovery period.​ (See table attached) for the applicable depreciation​ percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,900 and requires $4,900 in installation​ costs; it will be depreciated using a​ 5-year recovery period under MACRS. The existing machine can currently be sold for $25,800 without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of a new grading machine.

Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 12% 9% 9% 6. 5% 9% 8% 9% 7% 7 4% 6% 8. 6% 6% 10 4% 11 100% 100% 100% Totals 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year ANSwers in as fast as 30 minutes na neiD froatine
Transcribed Image Text:Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 12% 9% 9% 6. 5% 9% 8% 9% 7% 7 4% 6% 8. 6% 6% 10 4% 11 100% 100% 100% Totals 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year ANSwers in as fast as 30 minutes na neiD froatine
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