Answer (C) is correct . The net initial investment consists of the initial outlay for new equipment ($500,000) plus the increase to working capital ($44,000) minus the net after-tax cash flow from the disposal of the old equipment ($26,000). The cash inflow from the disposal of the old equipment is calculated as follows: Disposal value $?10,000 ? Less:? tax value (50,000) Tax-basis loss on disposal $(40,000) Tax-basis loss on disposal $40,000 Times:? tax rate 40% Tax benefit from disposal $16,000 Disposal value $10,000 Add:? tax benefit on loss 16,000 After-tax cash inflow from disposal $26,000，500000+44000-26000=518000.

Answer (A) is incorrect because The amount of $544,000 results from neglecting to deduct the net after-tax cash inflow from the disposal of the old equipment. Answer (B) is incorrect because The amount of $534,000 results from neglecting to take the tax benefit on the loss on disposal of the old equipment into account.
Answer (D) is incorrect because The amount of $498,000 results from neglecting to take the increase in accounts receivable into account.
Answer (B) is incorrect because The amount of $534,000 results from neglecting to take the tax benefit on the loss on disposal of the old equipment into account.
Answer (D) is incorrect because The amount of $498,000 results from neglecting to take the increase in accounts receivable into account.