Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 23 4 5 6 7 8 3 years 33% 45% 15% 7% 9 10 11 Totals Percentage by recovery year* 5 years 7 years 20% 14% 32% 25% 19% 12% 12% 5% 18% 12% 9% 9% 9% 4% 9% 8% 7% 6% 6% 6% 4% 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. 10 years 10% 18% 14% 12% Calculating initial investment DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $124,000. The firm has a chance to sell its 3-year-old roaster for $35,900. The existing roaster originally cost $60,900 and was being depreciated using MACRS and a 7-year recovery period (see the table). 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: Anticipated Changes in Current Assets and Current Liabilities Accruals Inventory Accounts payable Accounts receivable $19,300 +50,200 +39,600 +70,700