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 for the applicable depreciation percentages.) The new machine costs $23,200 and requires $2,020 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 $11,600. b. EMC sells the old machine for $6.920 c. EMC sells the old machine for $2,900. d. EMC sells the old machine for $1,530. i Data Table Calculate the initial investment at various sale prices below. a. EMC sells the old machine for $11,600. (Round to the nearest dollar.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a (a) spreadsheel) Cost of new asset $ Rounded Depreciation Percentages by Recovery Year Using MACRS for Installation cost First Four Property Classes Total installed cost $ Percentage by recovery year Recovery year 3 years 5 years 7 years 33% 20% 14% 10% Proceeds from sale of old asset $ 2 45% 32% 25% 18% 15% 19% 18% 14% Tax on sale of old asset $ 4 7% 12% 12% 12% Total after-tax proceeds $ 5 12% 9% 9% $ 5% Initial investment 9% 8% 9% 7% b. EMC sells the old machine for $6,920. (Round to the nearest dollar.) 8 4% 6% 9 6% (b) 10 6%6 11 4% Cost of new asset 23.200 Totals 100% 100% 100% 100% Enter any number in the edit fields and then continue to the next question. These percentages have been rounded to the nearest whole percent to simplily calculations while 10 years 1 3 6 7 ? b. EMC sells the old machine for $6,920. (Round to the nearest dollar.) (b) Cost of new asset 23,200 Installation cost 2,020 Total installed cost $ 25,220 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. (Round to the nearest dollar.) (c) Cost of new asset 23,200 Installation cost 2,020 Total installed cost 25,220 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 $1,530. (Round to the nearest dollar.) (d) Cost of new asset $ 23,200 Installation cost 2,020 Total installed cost $ 25,220 Proceeds from sale of old asset $ Tax on sale of old asset Total after-tax proceeds $ $ $ Initial investment
