calculate the tax effect from the scale of existing asset

QUESTION 31 5 points Say Table 11.4 Degnan Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Facts Existing Machine Proposed Machine Cost - $100,000 Cost - $150,000 Purchased 2 years ago Installation - $20,000 Deprecation using MACRS over Depreciation-the MACRS a 5-year recover schedule 5-year recovery schedule will be used Current market value - $105,000 Five year usable life remaning Five year usable life expected Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year 1 $160,000 Year 1 $170,000 2 150,000 2 170,000 3 140,000 3 170,000 4 140,000 4 170,000 5 140,000 5 170,000 The firm pays 40 percent taxes on ordinary income and capital gains. Calculate the tax effect from the sale of the existing asset. (See Table 11.4) For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac)