Problem:
A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $70,000 and was being depreciated under MACRS using a five-year recovery period. The existing asset can be sold for $30,000. The new asset will cost $80,000 and will also be depreciated under MACRS using a five-year recovery period.
Required:
Question: If the assumed tax rate is 40 percent on ordinary income and capital gains, the initial investment is
A) $48,560
B) $44,360
C) $49,240
D) $27,600
Note: Please show guided help with steps and answer.