Edwards Manufacturing Company (EMC) is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The firm is depreciating the machine under MACRS, using a 5-year recovery period. The new machine costs $24,000 and requires $2,000 in installation costs. The firm is subject to a 40% tax rate. In each of the following cases, calculate the initial investment for the replacement.

a. EMC sells the old machine for $11,000.

b. EMC sells the old machine for $7,000.

c. EMC sells the old machine for $2,900.

d. EMC sells the old machine for$1,500.

Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes TABLE 4.2 Percentage by recovery yea ycars 20% 32 19 12 12 10 ycars 10% 18 14 12 Recovcry ycar 3 ycars 33% 45 15 14% 25 18 12 4 10 100% 100% 100% 100% Totals "These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance depreciation using the half-year convention