Initial investment-Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 2 years ago at an installed cost $19,300; it was being depreciated under MACRS using a 5-year recovery period. (See table E 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 $34,300 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 $24,600 without ncurring any removal or cleanup costs. The firm is subject to a 40% tax rate. Calculate the initial investment associated with the proposed purchase of a new grading machine. The initial investment will be $ . (Round to the nearest dollar.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* 5 years Recovery year 3 years 7 years 10 years 020 100
Initial investment-Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 2 years ago at an installed cost $19,300; it was being depreciated under MACRS using a 5-year recovery period. (See table E 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 $34,300 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 $24,600 without ncurring any removal or cleanup costs. The firm is subject to a 40% tax rate. Calculate the initial investment associated with the proposed purchase of a new grading machine. The initial investment will be $ . (Round to the nearest dollar.) Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* 5 years Recovery year 3 years 7 years 10 years 020 100
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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Initial Investment - Basic calculation
Transcribed Image Text:Initial investment-Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 2 years ago at an installed cost of
$19,300; it was being depreciated under MACRS using a 5-year recovery period. (See table E 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 $34,300 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 $24,600 without
incurring any removal or cleanup costs. The firm is subject to a 40% tax rate. Calculate the initial investment associated with the proposed purchase of a new grading machine.
The initial investment will be $
(Round to the nearest dollar.)
Data Table
(Click on the icon located on the top-right corner of the data table below in order to copy its contents 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%
2
45%
32%
25%
18%
3
15%
19%
18%
14%
4
7%
12%
12%
12%
5
12%
9%
9%
5%
9%
8%
7
9%
7%
Screenshot
8.
4%
6%
Enter you, aIS
9.
6%
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