Calculate the book value of the existing press being replaced. (See Table 11.1)
Table 11.1
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 pays a 40 percent marginal tax rate.
Book value of existing press = $35,000 × [1 - (0.20 + 0.32)] = $16,800
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