Economy Tool Company is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Existing Machine Cost = $100,000 Purchased 2 years ago Depreciation using MACRS Over a 5-year recover schedule Current market value = $ 105,000 Five year usable life remaining Facts Proposed Machine Cost = $150,000 Installation = $20,000 Depreciation--the MACRS 5-year recovery schedule will be used Five year usable life expected a Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year $160,000 Year 1 $170,000 2 150000 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. 13.) Given the information in table above for Economy Tool Company, compute the initial investment. a. $87,800 b. $67,800 c. $65,000 d. $85,800