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Acme Inc. may replace an old machine with a new, more efficient model. The old machine...

Acme Inc. may replace an old machine with a new, more efficient model. The old machine was purchased 5 years ago for $70,000. It is being depreciated over 7 years to zero book value using the straight-line method. Its current book value is $20,000. Its current market value is $16,000. The new machine costs $120,000. It will be depreciated over 6 years to zero book value using the straight-line method. After its useful life of 10 years it is expected to have a scrap value of $15,000. The new machine will increase Earnings before Depreciation and Taxes by $25,000 per year for 10 years. The company's tax rate is 30% and the appropriate discount rate for this project is 10%.Compute the initial investment for this project.Important::
Enter your answer in whole dollars (e.g., $45,000 or 45000)
Do not include any decimal places (cents)
The initial investment should be signed positive although it is a cash outflow.

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Answer #1
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Proceeds from sale of existing asset =selling price* ( 1 -tax rate) 11200
Tax shield on existing asset book value =Book value * tax rate 6000
Cost of new machine -120000
=Initial Investment outlay -102800
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