Calculating initial investment VastineMedical, Inc., is considering replacing its existing computersystem, which was purchased 2 years ago at a cost of $316,000. The system can be sold today for $204,000. It is being depreciated using MACRS and a5-year recovery period(see the table LOADING...

). A new computer system will cost $490,000 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 theafter-tax proceeds of its sale for $204,000.

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

0 Data Table Rounded Depreciation Percentages by Recovery Year Using \"ACRE for First Four Property Classes Percentage by recovery year" Recovery year 3 years 5 years 1' years 1|] yea rs 33% 25% 14% 1 5% 45% 32% 25% 1 5% 1 5% 1 5% 1 5% 1 4% 2% 1 2% 1 2% 1 2% 12% 5% 5% 5% 5% 5% 5% 2% 4% 5% 5% 5% 4% 155% 155% 1 2 3 4 5 5 I" B 5 15 11