Initial investment -Basic Calculation Vastine Medical Inc. is considering replacing its existing Show more Initial investment -Basic Calculation Vastine Medical Inc. is considering replacing its existing computer system which was purchased 2 years ago at a cost of $325000.
Initial investment -Basic Calculation Vastine Medical Inc. is considering replacing its existing Show more Initial investment -Basic Calculation Vastine Medical Inc. is considering replacing its existing computer system which was purchased 2 years ago at a cost of $325000.
The system can be sold today for $200000. It is being depreciated using MACRS and a 5 year recovery period. A new computer system will cost $500000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a 40% tax rate. a. Calculate the book value of the existing computer system. b. Calculate the after-tax proceeds of its sale for $200000. c. Calculate the initial investment associated with the replacement project. Show less
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