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DataPoint Engineering is considering the purchase of a new piece of equipment for $260,000. It has an eight-year midpoint of its asset depreciation range (ADR).

DataPoint Engineering is considering the purchase of a new piece of equipment for $260,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $160,000 in nondepreciable working capital. Forty thousand dollars 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 $ 191,000
2 164,000
3 134,000
4 119,000
5 97,000
6 87,000

The tax rate is 35 percent. The cost of capital must be computed based on the following:

Cost (aftertax) Weights
Debt Kd 5.80 % 35 %
Preferred stock Kp 11.60 5
Common equity (retained earnings) Ke 16.00 60

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.)

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