Annual Operation
	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8
Cash operating savings
Less tax effect
Cash savings after tax	$0	$0	$0	$0	$0	$0	$0	$0
Depreciation tax shield
After-tax operating cash flows	$0	$0	$0	$0	$0	$0	$0	$0

Net present value

vE 6 Philadelphia Fastener Corparation manufactures nails, screws, bolts, and other fasteners, Management is considering a proposal to acquire new materlal-handling equipment. The new equipment has the same capacity as the current rating cfficiencics in labor and power usage. The savings in operatirg costs are dated at eEO000 anually 10 points tarted T wq doler is certain that the equipment will be operational during the second auarter of the vear it is installed. Therefore, 60 percent of the estimated annual savings cen be obtained in the first year. The company wil eBook lees sales will occur. however, because the processing fecility is lerge enouch to instell the new equipment without interfering with the operations of the current equipment The equipment is in the MACRS 7-year property class. The firm would depreciate the machinery in accordance with the MACRS depreciation schedule. Print The current cquipment has been fully depreciated. Management has reviewed its condition and has concluded that it the new cauipment and dispa5e of its current eauipment at this time. The new gquipment will haye no snivace value at References the end of its life. The company is subject to a 40 percent income-1 percent on any investment. x rate and requires an after-tax return of t least 12 Use Appendix A and Exhibit 16-9 for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1.Calculate the annual incremental after-tax cash flows for Philadelphia Fastener Corporation's proposal to acquire the new equipment. 2- eeuirement m Assume all cash Bor teke nlace at the ond of te pment using the cash flows calculated in 2-b. Should management purchase the new equipment? a. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Calculate the annual incremental after-tax cash flows for Philadelphia Fastener Corporation's proposal to acquire the new equipment. Annual Operation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Cash operating savings Less tax effect S D cigtion tax shigld After-tax operating cash s s S 0 $ $ S S flows Req 1 Req 2A