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Edwards Manufacturing Company​ (EMC) is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The new machine costs $24,700 and requires $1,900 in installation costs. Both machines are depreciable using a MACRS​ five-year recovery period​ See table attached, for the applicable depreciation​ percentages.) The firm is subject to a 21% tax rate. In each of the following​ cases, calculate the initial cash flow for the replacement.   a. EMC sells the old machine for $13,000.   b. EMC sells the old machine for $7,000.   c. EMC sells the old machine for $2,900.

Edwards Manufacturing Company​ (EMC) is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The new machine costs $24,700 and requires $1,900 in installation costs. Both machines are depreciable using a MACRS​ five-year recovery period​ See table attached, for the applicable depreciation​ percentages.) The firm is subject to a 21% tax rate. In each of the following​ cases, calculate the initial cash flow for the replacement.   a. EMC sells the old machine for $13,000.   b. EMC sells the old machine for $7,000.   c. EMC sells the old machine for $2,900.

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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 Edwards Manufacturing Company​ (EMC) is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The new machine costs $24,700 and requires $1,900 in installation costs. Both machines are depreciable using a MACRS​ five-year recovery period​ See table attached, for the applicable depreciation​ percentages.) The firm is subject to a 21% tax rate. In each of the following​ cases, calculate the initial cash flow for the replacement.
 
a. EMC sells the old machine for $13,000.
 
b. EMC sells the old machine for $7,000.
 
c. EMC sells the old machine for $2,900.
iti Data table (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 le Percentage by recovery year* Recovery year 3 уears 5 years 7 years 10 years fro 1 33% 20% 14% 10% 2 45% 32% 25% 18% le d 3 15% 19% 18% 14% -ta 4 7% 12% 12% 12% 12% 9% 9% flo 5% 9% 8% 7 9% 7% 8 4% 6% 6% 10 6% 11 4% Totals 100% 100% 100% 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 ес nst convention. Print Done
Transcribed Image Text:iti Data table (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 le Percentage by recovery year* Recovery year 3 уears 5 years 7 years 10 years fro 1 33% 20% 14% 10% 2 45% 32% 25% 18% le d 3 15% 19% 18% 14% -ta 4 7% 12% 12% 12% 12% 9% 9% flo 5% 9% 8% 7 9% 7% 8 4% 6% 6% 10 6% 11 4% Totals 100% 100% 100% 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 ес nst convention. Print Done
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