DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $135,000. The firm has a chance to sell its 5-year-old roaster for $35,100. The existing roaster originally cost $59,800 and was being depreciated using MACRS and a 7-year recovery period.

DuPree is subject to a 40% tax rate.

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:

Anticipated Changes

in Current Assets

and Current Liabilities

Accruals ?????? ? $ 19,200

Inventory ??????.. + 50,600

Accounts payable ???. + 39,300

Accounts receivable ??. + 69,900

Cash ???????????.. 0

Notes payable ?????. +15,500

d. Calculate the initial investment associated with the proposed newroaster.

Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 3 years 1 2 3 4 5 6 7 8 9 10 11 Totals 5 years 33% 45% 15% 7% 100% 7 years 10 years 20% 14% 10% 32% 25% 18% 19% 18% 14% 12% 12% 12% 12% 9% 9% 5% 9% 8% 9% 7% 4% 6% 6% 6% 4% 100% 100% 100%