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Initial investment at various sale prices 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 firm is depreciating the machine under MACRS, using a 5-year recovery period. (See table LOADING... for the applicable depreciation percentages.) The new machine costs $23,000 and requires $2,000 in installation costs. The firm is subject to a 40% tax rate. In each of the following cases, calculate the initial investment for the replacement.
a. EMC sells the old machine for $11,500.
b. EMC sells the old machine for $7,090.
c. EMC sells the old machine for $2,900 .
d. EMC sells the old machine for $1,570 .
Sagot :
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