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Accounting

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A corporation has decided to replace an existing asset with a newer model. The new asset will cost $70,000. The original asset, when purchased cost $10,000, was being depreciated under a straight line methodology, using a five-year recovery period, and has been depreciated for four full years. The existing asset can be sold for $8,000.

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

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170710

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