Calculating initial investmentDuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $123,000. The firm has a chance to sell its 4-year-old roaster for $34,500. The existing roaster originally cost $59,200and was being depreciated using MACRS and a 7-year recovery period DuPree is subject to a 40% tax rate.

Anticipated Changes in Current Assets and Current Liabilities

Accruals: -$20,100

Inventory: +50,100

Accounts payable: +40,300

Accounts receivable: +69,600

Cash: 0

Notes payable: +15,300

a. What is the book value of the existing roaster?

b. Calculate the after-tax proceeds of the sale of the existing roaster.

c. Calculate the change in net working capital using the following figures:

d. Calculate the initial investment associated with the proposed new roaster.

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	33%	20%	14%	10%
2	45%	32%	25%	18%
3	15%	19%	18%	14%
4	7%	12%	12%	12%
5		12%	9%	9%
6		5%	9%	8%
7			9%	7%
8			4%	6%
9				6%
10				6%
11				4%
Totals	100%	100%	100%	100%