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Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased 3 years ago at a cost of $330,000. The
Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased 3 years ago at a cost of $330,000. The system can be sold today for $195.000. It is being depreciated using MACRS and a 5-year recovery period (see the table ). A new computer system will cost $502,000 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 $195,000. c. Calculate the initial investment associated with the replacement project. a. The remaining book value is $. (Round to the nearest dollar.) b. The after-tax proceeds will be $ (Round to the nearest dollar) c. The initial investment will be $ (Round to the nearest dollar.) Sniping Tool is moving hame impeg phEual with Sri 7 years 9% Recovery year 3 years 5 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism To calculate the actual depreciation for tax nurnoses he sure to annly the actual
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