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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 $316,000. The
Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased 3 years ago at a cost of $316,000. The system can be sold today for $209,000. It is being depreciated using MACRS and a 5-year recovery period (see the table). A new computer system will cost $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. Calculate the book value of the existing computer system. Calculate the after-tax proceeds of its sale for $209,000. Calculate the initial investment associated with the replacement project. The remaining book value is $ square box. (Round to the nearest dollar.) The after-tax proceeds will be $ square box. (Round to the nearest dollar.) The initial investment will be $ square box. (Round to the nearest dollar.)
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