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 for the applicable depreciation percentages.) The new machine costs $23,900 and requires

$1,940 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 $12,100.

b. EMC sells the old machine for $6,990.

c. EMC sells the old machine for $2,900.

d. EMC sells the old machine for $1,460.

a. EMC sells the old machine for

$12,100.

(Round to the nearest dollar.)

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% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 100%

a)	EMC sells the old machine for $12,100
Cost of new asset	$
Installation cost
Total installed cost	$
Proceeds from sale of old asset	$
Tax on sale of old asset	$
Total after-tax proceeds	$
Initial investment	$

b)	EMC sells the old machine for $6,990
Cost of new asset	$	23,900
Installation cost		1,940
Total installed cost	$	25,840
Proceeds from sale of old asset	$
Tax on sale of old asset	$
Total after-tax proceeds	$
Initial investment	$

c)	EMC sells the old machine for $2,900
Cost of new asset	$	23,900
Installation cost		1,940
Total installed cost	$	25,840
Proceeds from sale of old asset	$
Tax on sale of old asset	$
Total after-tax proceeds	$
Initial investment	$

d)	EMC sells the old machine for $1,460
Cost of new asset	$	23,900
Installation cost		1,940
Total installed cost	$	25,840
Proceeds from sale of old asset	$
Tax on sale of old asset	$
Total after-tax proceeds	$
Initial investment	$