Initial investment Basiccalculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 4years ago at an installed cost of $20,800 ;it was being depreciated under MACRS using a 5-year recovery period.The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,500and requires $5,100in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $24,400

without incurring any removal or cleanup costs. The firm is subject to a 40%

tax rate. Calculate the initial investment associated with the proposed purchase of a new grading machine.

Recovery years are yr1 20%; yr 2 32%, yr3 19%, yr4 12%