Question

Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased 2 years ago at a cost of S327,000. The system can be sold today for $210,000. It is being depreciated using MACRS and a 5-year eco e y period see the able A new oomputer system will cost $502 000 p chase and install Replacement o the computer system would not involve any change in net working capital Assume a 40% tax rate on ordinary income and capital gains. a. Calculate the book value of the existing computer system. b. Calculate the after-tax proceeds of its sale for $210,000 c. Calculate the initial investment associated with the replacement project. Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a a. The remaining book value is SRound to the nearest dollar.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year 7 years 5 years 20% 32% 19% 12% 12% 5% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 3 years 33% 45% 15% Recovery year 14% 25% 18% 12% 9% 9% 6 4% 10 100% 100% 100% 100% Totals