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...

Extracted text: 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 $127,000. The firm has a chance to sell its 3-year-old roaster for $34,900. The existing roaster originally cost $60,800 and was being depreciated using MACRS and a 7-year recovery period (see the table E). 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: Data Table Anticipated Changes in Current Assets and Current Liabilities (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a -$19,000 + 50,600 + 39,200 + 70,200 Accruals spreadsheet.) Inventory Accounts payable Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Accounts receivable Percentage by recovery year* 5 years Cash a. The remaining book value of the existing roaster is $ (Round to the nearest dollar.) Recovery year 3 years 7 years 10 years 1 33% 20% 14% 10% b. The after-tax proceeds of the sale of the existing roaster will be $. (Round to the nearest dollar.) 2 45% 32% 25% 18% 3 15% 19% 18% 14% c. The change in net working capital will be $. (Round to the nearest dollar.) 4 7% 12% 12% 12% 12% 9% 9% d. The initial investment associated with the proposed new roaster will be $ (Round to the nearest dollar.) 6 5% 9% 8% 7 9% 7% 8 4% 6% 6% 10 6% 11 4% Totals 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. Print Done