DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $ 139,000. The firm has a chance to sell its 5-year-old roaster for $ 34,600. The existing roaster originally cost $ 60,100

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:

ACCRUALS (-19,800)

INVENTORY (+49,000)

ACCOUNTS PAYABLE (+41,000)

ACCOUNTS RECEIVABLE (+70,300)

CASH (0)

NOTES PAYABLE (+14,100)

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