of a new grading machine replace the existing one. ing mac was purchased installe Cost 1S20, 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 ma costs $35,000 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 $24,500 without incurring any removal or cleanup co 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 SO (Round to the nearest dollar.) O Data Table - X (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 20% 7 years 14% 10 years 10% 3 years Recovery year 1 33% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 9% 8% 7% 12% 9% 6 5% 9% 7 9%
of a new grading machine replace the existing one. ing mac was purchased installe Cost 1S20, 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 ma costs $35,000 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 $24,500 without incurring any removal or cleanup co 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 SO (Round to the nearest dollar.) O Data Table - X (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 20% 7 years 14% 10 years 10% 3 years Recovery year 1 33% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 9% 8% 7% 12% 9% 6 5% 9% 7 9%
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 18P: Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting...
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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 4 years ago at an installed cost of $20,100; 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 $35,000 and requires $5,500 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can curently be sold for $24,500 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*
5 years
Recovery year
3 years
7 years
10 years
1
33%
20%
14%
10%
45%
32%
25%
18%
3
15%
19%
18%
14%
4
7%
12%
12%
12%
5
12%
9%
9%
6
5%
9%
8%
7
9%
7%
8
4%
6%
Enter your answer in the answer box.
6%
10
6%
11
4%
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