DataPoint Engineering is considering the purchase of a new piece of equipment for $235,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $240,000 in nondepreciable working capital. $80,000 of this investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Use Table 1211, Table 1212. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Year	Amount
1	$	239,000
2		196,000
3		166,000
4		151,000
5		113,000
6		103,000

The tax rate is 25 percent. The cost of capital must be computed based on the following:

		Cost (aftertax)			Weights
Debt	Kd		11.20	%		60	%
Preferred stock	Kp		13.50			10
Common equity (retained earnings)	Ke		18.00			30

a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.) b. Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6. (Do not round intermediate calculations and round your answers to 2 decimal places.) c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) d-1. Determine the net present value. (Use the WACC from part c rounded to 2 decimal places as a percent as the cost of capital (e.g., 12.34%). Do not round any other intermediate calculations. Round your answer to 2 decimal places.)

d-2. Should DataPoint purchase the new equipment? Yes or No?

Appendix B Present value of $1, PVF PV = FV 1 (1+1" Percent Period 1% 2% 3% 4% 8% 11% 12% 5% 0.952 1 ......... 0.971 0.980 0.961 0.962 0.925 0.926 0.857 0.901 0.812 0.893 0.797 2 0.907 3 0.794 0.990 0.980 0.971 0.961 0.951 0.942 0.933 4 0.942 0.924 0.906 0.943 0.915 0.888 0.863 0.837 0.712 0.636 0.864 0.823 0.784 0.746 5 0.731 0.659 0.593 0.535 . 0.735 0.681 0.630 0.583 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.567 0.507 6 0.888 7 0.871 6% 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 0.527 0.497 0.469 0.442 0.482 0.452 8 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.540 0.434 0.404 0.923 0.914 0.905 0.853 0.837 0.813 0.789 0.766 0.744 0.722 0.711 0.677 0.645 0.614 9 0.500 0.463 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 10 0.820 0.361 0.322 0.287 0.257 11 0.585 0.429 0.896 0.887 0.391 0.352 0.317 0.286 0.258 0.232 12 0.557 0.397 0.388 0.356 0.326 0.299 13 0.879 0.701 0.681 0.661 0.415 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.368 0.530 0.505 0.229 0.205 14 0.870 0.577 0.388 0.340 15 0.642 0.555 0.481 0.315 0.275 0.183 0.861 0.853 16 0.623 0.605 0.458 0.436 0.417 0.394 0.371 0.292 0.270 0.252 0.231 0.209 0.188 0.170 17 0.844 0.534 0.513 0.494 0.475 18 0.416 0.350 0.836 0.828 0.820 0.700 0.686 0.673 0.362 0.339 0.317 0.296 0.277 0.258 0.184 0.131 0.587 0.570 0.554 19 0.212 0.194 0.250 0.232 0.215 0.153 0.138 0.163 0.146 0.130 0.116 0.104 0.396 0.164 0.149 20 0.377 0.124 25 0.610 0.295 0.456 0.375 0.308 0.146 0.780 0.742 0.478 0.412 0.074 0.331 0.312 0.233 0.174 0.097 0.054 0.178 0.116 0.075 0.059 0.033 30 0.552 0.099 0.231 0.142 0.092 0.057 0.022 0.009 40 0.067 0.046 0.672 0.608 0.011 0.453 0.372 0.307 0.228 0.208 0.141 0.044 0.015 0.005 0.032 0.013 50 0.087 0.034 0.021 0.003 Appendix B (concluded) Present value of $1 1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.870 0.862 0.855 0.847 0.833 0.769 0.741 0.714 0.667 0.840 0.706 0.800 0.640 0.783 0.756 0.743 0.731 0.718 0.694 0.592 0.510 N M 0.769 0.675 0.592 0.693 0.444 0.296 0.658 0.572 0.641 0.552 0.624 0.534 0.609 0.515 0.593 0.499 0.579 0.482 0.512 0.410 0.549 0.406 0.301 0.455 0.350 0.364 0.260 4 . 198 0.476 0.456 0.437 0.402 0.269 0.223 0.132 5 6 0.613 0.543 0.480 0.425 0.519 0.456 0.497 0.432 0.419 0.352 0.328 0.262 0.186 0.133 0.410 0.390 0.370 0.335 0.207 0.165 0.088 7 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.210 0.122 0.095 0.059 0.159 0.123 8 0.351 0.327 0.305 0.285 0.249 0.233 0.168 .091 0.068 0.039 0.376 0.333 9 0.284 0.263 0.243 0.266 0.225 0.191 0.209 0.194 0.134 .067 .048 0.308 0.270 0.026 0.094 .073 10 0.295 0.247 0.227 0.208 0.176 0.162 .050 .035 0.017 0.107 0.086 11 0.261 0.237 0.178 0.162 0.148 0.135 0.056 .037 0.025 0.012 0.195 0.168 12 0.231 0.124 0.018 0.008 0.208 0.182 0.152 0.130 0.215 0.187 0.163 0.141 0.123 0.1 12 0.093 13 0.069 0.055 0.204 0.137 0.116 0.099 0.145 0.104 .043 .033 0.025 0.005 0.027 .020 0.015 0.011 .013 0.009 14 0.181 0.125 0.111 0.088 0.078 0.044 0.003 15 0.160 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.035 0.020 0.006 0.002 16 0.093 0.062 0.054 .028 0.015 0.002 .081 0.069 0.008 0.006 17 0.023 0.001 0.141 0.125 0.111 0.098 0.087 0.107 0.093 0.081 0.070 0.108 0.095 0.083 18 0.071 0.060 0.051 0.043 0.080 0.069 0.060 0.052 0.044 0.037 0.005 0.003 0.002 0.002 0.045 0.038 0.031 0.059 0.051 0.012 0.009 0.007 0.001 .018 .014 0.005 0.003 19 20 .073 0.061 0.051 0.043 0.037 0.031 .026 0.012 0.005 0.002 0.001 25 0.047 0.038 0.030 0.024 0.020 0.013 0.010 0.004 0.001 0.001 30 0.026 0.008 0.001 0.020 0.005 0.015 0.004 0.016 0.007 0.001 0.012 0.003 0.009 0.002 0.005 0.001 0.004 0.001 40 50 0.002 0.001 0.001 0.001