The purchase price for a new piece of equipment is $55,000. Set-up and installation costs to get the machine ready to operate will be $3,000. Raw material inventory will be decreased by $1,900 at the beginning of the project, since the new equipment no longer requires a certain type of raw material that was previously used. The cost of capital is 13%. The asset is classified as a 5-year asset for purposes of depreciation, using the MACRS depreciation method. What is the amount of depreciation the company will record in year 3?
MACRS depreciation rates (percentages) for the first 5 years for a 5-year asset are as follows:
Yr 1 Rate: 20%
Yr 2 Rate: 32%
Yr 3 Rate: 19%
Yr 4 Rate: 12%
Yr 5 Rate: 11%
[If needed, round your answer to two decimal places.]
