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

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

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