Corporation is considering the purchase of a new grading machine to
replace the existing one. The existing machine was purchased 2
years ago at an installed cost of $19,800; it was being
depreciated under MACRS using a 5-year recovery
period. 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 $5,500 in installation costs; it
will be depreciated using a 5-year recovery period under
MACRS. The existing machine can currently be sold for $24,600
without incurring any removal or cleanup costs. The firm is subject
to a 21% tax rate. Calculate the initial cash flow associated with
the proposed purchase of a new grading machine.
- Initial Cash Flow Basic Calculation Cushing Corporation Is Considering The Purchase Of A New Grading Machine To Rep 1 (146.67 KiB) Viewed 42 times
Data table X 10 years Percentage by recovery year* Recovery year 3 years 5 years 7 years 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% 79% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 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 100% Print Done