Please explain the final answer.

A material handling system was purchased 3 years ago for $123,816. Two years ago it required substantial upgrading at a cost of $16,340. It once again is requiring an upgrading cost of $24,254. Alternately, a new system can be purchased today at a cost of $200,688, with a salvage value of $19,120. The existing machine could be sold today for $49,996.

In an economic replacement analysis, what first cost should be assigned to the existing system?