Sony Pacific Music Corporation is considering the purchase of a new sound board used in recording studios
Question:
Sony Pacific Music Corporation is considering the purchase of a new sound board used in recording studios to improve its sound effect. The existing sound board was purchased 3 years ago at an installed cost of $23,500; it was being depreciated under MACRS using a 5-year recovery period.
Table 4.2:
The existing sound board is expected to have a usable life of at least 4 more years. The new sound board costs $38,800 and requires $5,400 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $27,300 without incurring any removal or cleanup costs. The firm is subject to a 20% tax rate. Calculate the initial investment associated with the proposed purchase of a new sound board.
TABLE 4.2 Recovery year 1 2 3 4 56700 8 9 10 11 Totals Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes 3 years 33% 45 15 7 100% Percentage by recovery year" 5 years 7 years 20% 14% 25 18 12 32 19 225 12 12 100% 9 9 9 100% 10 years 10% 18. 14 12 9 8 7 6 6 6 100%
Step by Step Answer:
To calculate the initial investment associated with the proposed purchase of a new soundboard you need to consider the following factors Cost of the n...View the full answer
Principles Of Managerial Finance
ISBN: 9781292018201
14th Global Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
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