Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 4 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year recovery period. (See table 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 $5,500 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $25,700 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. The initial cash flow will be $. (Round to the nearest dollar.) Data table covery year 1 2 3 4 5 6 7 8 9 10 CIE 3 years 33% 45% 15% 7% Percentage by recovery year* 5 years 20% 32% 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years ********** - X
Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 4 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year recovery period. (See table 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 $5,500 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $25,700 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. The initial cash flow will be $. (Round to the nearest dollar.) Data table covery year 1 2 3 4 5 6 7 8 9 10 CIE 3 years 33% 45% 15% 7% Percentage by recovery year* 5 years 20% 32% 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years ********** - X
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
Problem 1PS
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Transcribed Image Text:Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 4 years ago at
an installed cost of $20,700; it was being depreciated under MACRS using a 5-year recovery period. (See table 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 $5,500 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing
machine can currently be sold for $25,700 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.
The initial cash flow will be $
(Round to the nearest dollar.)
Data table
covery year
1
HY68L24557
10
11
Totals
...
3 years
33%
45%
15%
7%
100%
Percentage by recovery year*
5 years
20%
32%
19%
12%
12%
5%
Print
100%
Done
7 years
14%
25%
18%
12%
9%
9%
9%
4%
100%
10 years
10%
18%
14%
12%
9%
8%
7%
6%
6%
6%
4%
100%
X
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