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Problem:

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.

Required:

Question 1: Calculate the tax effect from the sale of the existing asset.

Question 2: Calculate the initial investment of the new asset.

Note: Please provide full description.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171354

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