Question: Bank ABC Berhad is considering replacing its existing computer system, which was purchased 2 years ago at a cost of RM325, 000. The system can

Bank ABC Berhad is considering replacing its existing computer system, which was purchased 2 years ago at a cost of RM325, 000. The system can be sold today for RM200, 000. It is being depreciated and 5-year recovery period. A new computer system will cost RM500, 000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a 40% tax rate. Calculate the following;

The book value of the existing computer system. (3 marks)
the after-tax proceeds of its sale for RM200,000 (4 marks)
The initial investment associated with the replacement project. (4 marks)

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