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Fine Press is considering replacing the existing press with a more efficient press. The new press costs $55,000 and requires $5,000 in installation costs. The old press was purchased 2 years ago for an installed cost of $35,000 and can be sold for $20,000 net of any removal costs today. Both presses are depreciated under the MACRS 5-year recovery schedule. The firm is in 40 percent marginal tax rate. Please show the work for each of the below.

1) Calculate the book value of the existing press being replaced.

2) Calculate the tax effect from the sale of the existing asset.

3) Calculate the initial investment of the new asset.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91728849

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