P1111 Calculating initial investment Vastine Medical Inc. is replacing its computer system, which was purchased 2 years ago at a cost of $325,000. The system can be sold today for $200,000. It is being depreciated using MACRS and a 5-year recovery period. A new computer system will cost $500,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a 21% tax rate.

I do not have a finance calculator, I only have the TI84 Plus .... Please show work, thanks.

1. Calculate the book value of the existing computer system (see Table 4.2).
2. Calculate the after-tax proceeds of its sale for $200,000.
3. Calculate the initial investment associated with the replacement project. What would the initial investment be if the new computer qualified for 100% bonus depreciation?

Table 4.2 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery yeara 3 years 33% 45 15 5 years 20% 32 19 12 12 7 years 14% 25 18 12 10 years 10% 18 14 12 Recovery year 4 6 4 6 9 6 4 100% 10 Totals 100% 100% 100% Table 4.2 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery yeara 3 years 33% 45 15 5 years 20% 32 19 12 12 7 years 14% 25 18 12 10 years 10% 18 14 12 Recovery year 4 6 4 6 9 6 4 100% 10 Totals 100% 100% 100%