Calculating initial investment Vastine Medical Inc. is considering replacing its existing computer system, which was purchased 2 years age at a cost of $320,000 The system can be sold today for $112.000 is being change in etworking depreciated using MACRS and a 5-year recovery period see the table ) Anew computer system will cost $522,000 to purchase and install Replacement of the compider system would not involve capital Assume 30% tex rata on ordinary income and capital gains Calculate the after tas proceeds of sale for $132.000 Calidate the initial investment associated with the replacement project The after-ta proces will be and to the meant char) Data table 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 1 33% 20% 14% 2 45% 32% 25% 3 15% 19% 18% 4 7% 12% 12% 5 12% 9% 5% 9% 9% 8 4% 6% 9 6% 10 6% 4% 11 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 purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. 10 years 10% 18% 14% 12% 9% 8% 7% - X Calculating initial investment Vastine Medical Inc. is considering replacing its existing computer system, which was purchased 2 years age at a cost of $320,000 The system can be sold today for $112.000 is being change in etworking depreciated using MACRS and a 5-year recovery period see the table ) Anew computer system will cost $522,000 to purchase and install Replacement of the compider system would not involve capital Assume 30% tex rata on ordinary income and capital gains Calculate the after tas proceeds of sale for $132.000 Calidate the initial investment associated with the replacement project The after-ta proces will be and to the meant char) Data table 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 1 33% 20% 14% 2 45% 32% 25% 3 15% 19% 18% 4 7% 12% 12% 5 12% 9% 5% 9% 9% 8 4% 6% 9 6% 10 6% 4% 11 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 purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. 10 years 10% 18% 14% 12% 9% 8% 7% - X
