ACC 2212 - Comprehensive Problems Problem 5-The Woodruff Corporation The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation range (ADR) midpoint of eight years. The old equipment can be sold for $90,000. A new piece of equipment can be purchased for $320,000. It also has an ADR of eight years. Assume the old and new equipment would provide the following operating gains (or losses) over the next six years: New Old Equipment Equipment $80,000 $25,000 76,000 16,000 70,000 9,000 60,000 8,000 50,000 6,000 45,000 (7,000) The firm has a 25 percent tax rate and a 9 percent cost of capital. Complete the following: a. Book value of the old equipment b. Cash inflow from the sale of the old l equipment c. Net cost of the new equipment d. Prepare a depreciation schedule for the new equipment e. Prepare a depreciation schedule for the remaining years of the old equipment f. Prepare a schedule of incremental depreciation and tax-shield benefits g. Prepare a schedule of the after-tax cost savings h. Prepare a schedule of total annual benefits based on cash flows from above schedules i. Calculate the net present value (NPV) j. Should the new equipment be purchased to replace the old equipment? Page 6 of 11.