P11-14 Calculating initial investment DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled auto- matic-feed roaster will be $130,000. The firm has a chance to sell its 4-year-old roaster for $35,000. The existing roaster originally cost $60,000 and was being de- preciated using MACRS and a 7-year recovery period. (See Table 4.2 on page 166 for the applicable depreciation percentages.) 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 figures given in the follow- ing table. Anticipated Changes in Current Assets and Current Liabilities Accruals -$20,000 Inventory + 50,000 Accounts payable + 40,000 Accounts receivable + 70,000 Cash 0 Notes payable +15,000 d. Calculate the initial investment associated with the proposed new roaster, TAE 4.2 Recovery year 1 2 3 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year! 3 years 5 years 7 years 10 years 33% 20% 14% 10% 45 32 25 18 15 19 18 14 7 12 12 12 12 9 5 8 7 5 6 7 8 6 9 10 11 Totals 100% 100% 100% 100% "These percentages have been rounded to the nearest whole percent to simplify calculations while retain ing realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance depreciation using the half-year convention