Nguyen Inc. is considering the purchase of a new computer system (ICX) for $120,000. The system...

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Nguyen Inc. is considering the purchase of a new computer system (ICX) for $120,000. The system will require an additional $20,000 for installation. If the new computer is purchased it will replace an old system that has been fully depreciated. The new system will be depreciated under the MACRS rules applicable to 7- year class assets. If the ICX is purchased, the old system will be sold for $20,000. The ICX system, which has a useful life of 10 years, is expected to increase revenues by $36,000 per year over its useful life. Operating costs are expected to decrease by $3,000 per year over the life of the system. The firm is taxed at a 40 percent marginal rate. Use Table 9A-3 to answer the questions below. Round your answers to the nearest dollar. a. What net investment is required to acquire the ICX system and replace the old system? $ 128000 b. Compute the annual net cash flows associated with the purchase of the ICX system. Year 1 NCF 30606 2 39750 3 34088 4 $ 29296 5 $ 26515 6 26566 7 26515 8 3357 9 3357 10 $ 3357 ATABLE 9A.3 Depreciation Rates for MACRS Property Other than Real Property* Recovery Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81 19.20 17.49 14.40 8.55 6.677 4 7.41 11.52 1249 11.52 7.70 6.177 5 11.52 8.93 9.22 6.93 5.713 6 5.76 8.92 7.37 6.23 5.285 7 8.93 6.55 5.90 4.888 8 4.46 6.55 5.90 4.522 9 6.56 5.91 4.462 10 6.55 5.90 4.461 11 3.28 5.91 4.462 23456T22 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 16 2.95 4.461 17 18 4.462 4.461 19 20 21 4.462 4.461 2.231 "Assumes that the half-year convention applies. Nguyen Inc. is considering the purchase of a new computer system (ICX) for $120,000. The system will require an additional $20,000 for installation. If the new computer is purchased it will replace an old system that has been fully depreciated. The new system will be depreciated under the MACRS rules applicable to 7- year class assets. If the ICX is purchased, the old system will be sold for $20,000. The ICX system, which has a useful life of 10 years, is expected to increase revenues by $36,000 per year over its useful life. Operating costs are expected to decrease by $3,000 per year over the life of the system. The firm is taxed at a 40 percent marginal rate. Use Table 9A-3 to answer the questions below. Round your answers to the nearest dollar. a. What net investment is required to acquire the ICX system and replace the old system? $ 128000 b. Compute the annual net cash flows associated with the purchase of the ICX system. Year 1 NCF 30606 2 39750 3 34088 4 $ 29296 5 $ 26515 6 26566 7 26515 8 3357 9 3357 10 $ 3357 ATABLE 9A.3 Depreciation Rates for MACRS Property Other than Real Property* Recovery Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81 19.20 17.49 14.40 8.55 6.677 4 7.41 11.52 1249 11.52 7.70 6.177 5 11.52 8.93 9.22 6.93 5.713 6 5.76 8.92 7.37 6.23 5.285 7 8.93 6.55 5.90 4.888 8 4.46 6.55 5.90 4.522 9 6.56 5.91 4.462 10 6.55 5.90 4.461 11 3.28 5.91 4.462 23456T22 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 16 2.95 4.461 17 18 4.462 4.461 19 20 21 4.462 4.461 2.231 "Assumes that the half-year convention applies.