Initial

investmentBasic

calculationCushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased

4

years ago at an installed cost of

$20,500;

it was being depreciated under MACRS using a 5-year recovery period. (See table

LOADING...

for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs

$34,000

and requires

$4,600

in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for

$24,300

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.

Question content area bottom

Part 1

The initial investment will be

$enter your response here.

(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%