p11-11

Would the change in net working capital enter into any of the other cash flow c. types that make up the project's net cash flows? Explain. P11-11 Calculating initial investment Vastine Medical Inc. is replacing its computer sys- GO tem, 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. a. Calculate the book value of the existing computer system (see Table 4.2). b. Calculate the after-tax proceeds of its sale for $200,000. c. Calculate the initial investment associated with the replacement project. What would the initial investment be if the new computer qualified for 100% bonus depreciation? Isult from the proposed replacement action. b. Explain why a change in these current accounts would be relevant in determining c. Would the change in net working capital enter into any of the other cash flow types that make up the project's net cash flows? Explain. Calculating initial investment Vastine Medical Inc. is replacing its computer sys- tem, 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. install. Replacement of the computer system would not involve any chan working capital. Assume a 21% tax rate. a. Calculate the P11-11 A new computer system will cost $500,000 to purchase and ge in net book value of the existing computer system (see Table 4.2) Calculate the initial investment associated with the replacement project. What would the initial investment be if the new computer qualified for 100% bonus depreciation: c