The president of Harbison Inc. has asked you to evaluate the proposed acquisition of a new computer. The computers price is $40,000, and it falls in the MACRS 3-year class. The applicable annual depreciation rates are 33%, 45%, 15% and 7%. Purchase of the computer would require a one-time increase in net operating working capital of $2000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs of $5000 per year. The computer is expected to be used for three years and then sold for $25,000. The firm's marginal tax rate is 40%, and the project's cost of capital is 14%. For Harbison Inc. what is the net investment required at t = 0 (the beginning of year 1)?

1. -$42,000
2. -$40,000
3. -$38,000
4. -$37,000

An equation to go along with the answer would be very helpful. Thanks