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Problem:

A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $70,000 and was being depreciated under MACRS using a five-year recovery period. The existing asset can be sold for $30,000. The new asset will cost $80,000 and will also be depreciated under MACRS using a five-year recovery period.

Required:

Question: If the assumed tax rate is 40 percent on ordinary income and capital gains, the initial investment is

A) $48,560

B) $44,360

C) $49,240

D) $27,600

Note: Please show guided help with steps and answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168487

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