Initial cash flow at various sale pricesEdwards 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 new machine costs

$24,200

and requires

$1,970

in installation costs. Both machines are depreciable using a MACRS five-year recovery period (See table

LOADING...

for the applicable depreciation percentages.) The firm is subject to a

21%

tax rate. In each of the following cases, calculate the initial cash flow for the replacement.a. EMC sells the old machine for

$12,400.

b. EMC sells the old machine for

$7,040.

c. EMC sells the old machine for

$2,900.

d. EMC sells the old machine for

$1,440.

Question content area bottom

Part 1

Calculate the initial cash flow at various sale prices below.

a. EMC sells the old machine for

$12,400.

(Round to the nearest dollar.)

	(a)
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 cah flow	$

Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance ( 200%) depreciation using the half-year convention