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New Machine will cost $750,000, and will be depreciated using 7-year MACRS. Old Machine is 2 years old, originally cost $500,

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Answer #1

Option 2

Year 2 depreciation rate MACRS-7 year = 24%

Depreciation on new machine = 750000*24%=180000

Year 4 depreciation rate MACRS 5 year= 11.5%

Depreciation on old machine= 500000*11.5%= 57500

Difference= 122500

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