A corporation has decided to replace an existing asset with a newer model. Two years ago, the
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Question:
A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $60,000 and was being depreciated under MACRS using a five-year recovery period. The existing asset can be sold for $40,000. The new asset will cost $80,000 and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40 percent on ordinary income and capital gains, the initial investment is ________.
$42,376
$44,480
$48,240
$49,569
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