Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased 3 years ago at a cost of $332,000. The system can be sold $495,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a %40% tax rate on ordinary income and capital gains.

a. Calculate the book value of the existing computer system.

b. Calculate the after-tax proceeds of its sale for $193,000.

c. Calculate the initial investment associated with the replacement project.

Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes
	Percentage by recovery year*
Recovery year	3 years	5 years	7 years	10 years
1	3333%	2020%	1414%	1010%
2	4545%	3232%	2525%	1818%
3	1515%	1919%	1818%	1414%
4	77%	1212%	1212%	1212%
5		1212%	99%	99%
6		55%	99%	88%
7			99%	77%
8			44%	66%
9				66%
10				66%
11				44%
Totals	100100%	100100%	100100%	100100%

a. The remaining book value is $

b. The after-tax proceeds will be $

c. The initial investment will be $