Company BBB purchased a computerized measuring device two years ago for $80,000. It falls into

the 5-year category for MACRS depreciation. The equipment can currently be sold for $28,400.

A new piece of equipment will cost $210,000, and falls into the same 5-year MACRS category for

depreciation. The new equipment is expected to provide the following stream of added cost savings

for the next 6 years. Tax rate is 34%, and the cost of capital is 15%. Should the replacement be undertaken?

Fill in the blanks in the following excel image:

\begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 & Year 6 & & \\ \hline Cost Savings & $66,000 & $56,000 & $50,000 & $45,000 & $40,000 & $30,000 & & \\ \hline 5-Year MACRS Depreciation Rates & 20.00% & 32.00% & 19.20% & 11.50% & 11.50% & 5.80% & & \\ \hline & & & & & & & & \\ \hline \multicolumn{9}{|l|}{ REPLACEMENT DECISION } \\ \hline & & & & & & & & \\ \hline \multicolumn{9}{|l|}{ INFORMATION } \\ \hline (1) Purchasing Price of Old Machine & & $80,000 & & & & & & \\ \hline (2) Purchasing Price of New Machine & & $210,000 & & & & & & \\ \hline (3) Sales Price of Old Machine & & $28,400 & & & & & & \\ \hline (4) Tax Rate & & 34% & & & & & & \\ \hline (5) WACC & & 15% & & & & & & \\ \hline ANNUAL DEPRECIATIONS & Year-2 & Year-1 & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 & Year 6 \\ \hline (6) 5-Year MACRS Depreciation Rates & & & \multirow[t]{2}{*}{20.00%} & \multirow{2}{*}{\multicolumn{2}{|c|}{19.20%}} & 11.50% & \multirow[t]{2}{*}{11.50%} & \multirow[t]{2}{*}{5.80%} \\ \hline \multicolumn{4}{|l|}{ (7) New Machine Depreciation } & & & & & \\ \hline \multicolumn{9}{|l|}{ (8) Old Machine Depreciation } \\ \hline \multicolumn{9}{|l|}{ (9) Incremental Depreciation: (7)-(8) } \\ \hline & & & & & & & & \\ \hline & & & & & & & & \\ \hline Book-Value of Old Machine & & & & \multirow{2}{*}{\multicolumn{2}{|c|}{\begin{tabular}{l} Tax Benefit/Loss \\ (13) Sales Price: from (3) \end{tabular}}} & on Sale & & \\ \hline (10) Purchasing Price of Old Machine: (1) & & & & & & & & \\ \hline \multicolumn{2}{|l|}{ (11) Total Depreciation of Old Machine to date } & & & \multicolumn{3}{|c|}{ (14) Tax Loss on Sale: (13)-(12) } & & \\ \hline (12) Book-Value of Old Machine & & & & \multicolumn{3}{|c|}{ (15) Tax Benefit: (14)Tax Ri } & & \\ \hline \multicolumn{9}{|l|}{ (16) Net Cost of New Machine: (2)-(3)-(15) } \\ \hline Total Benefits & & & Year 1 & Year? & Year 3 & Year 4 & Year 5 & Year 6 \\ \hline & & & & & & & & \\ \hline \multicolumn{9}{|l|}{ (17) Cost Savings Benefit from New Machine: (3) } \\ \hline \\ \hline \multicolumn{9}{|l|}{ (19) Incremental Depreciation: (9) } \\ \hline \multicolumn{9}{|c|}{ (20) Tax Shield Benefit from Depreciation: (19)Tax Rate } \\ \hline \multicolumn{9}{|l|}{ (21) Total Benefits: (18)+(20)} \\ \hline DECISION with NPV & & Year 0 & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 & Year 6 \\ \hline & & & Cost of Capita & & & & & \\ \hline & & & NPV & & & & & \\ \hline & & & DECISION & & & & & \\ \hline \end{tabular}