QUESTION 3 CHAPTER 11 HW

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 $24,900 and requires $1,920 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 $11,200. 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 $1,430. Calculate the initial investment at various sale prices below. a. EMC sells the old machine for $11,200. (Round to the nearest dollar.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes " I nese percentages nave deen rounded to tne nearest wnole percent to smpilty caiculatons wnle 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