DataPoint Engineering is considering the purchase of a new piece of equipment for $280,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $180,000 in pandepreciable working capital. $45,000 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 12-11, Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Amount 1 $ 197,000 2 168,000 138.000 4 123,000 99,000 89,000 1 The tax rate is 25 percent. The cost of capital cust be computed based on the following: Cost (aftertax) Weights Debt K 6.30% 30% Preferred stock K 10.40 10 Common equity (retained earnings) 15.00 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.) Depreciation Percentage Depreciation Depreciation Annual Base 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.) Year Cash Flow 2 c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Weighted average cost of capital 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.) Net present value d-2. Should DataPoint purchase the new equipment? Yes No Table 12-11 Categories for depreciation write-off Class 3. year MACRS All property with ADR midpoints of four years or Autos and light trucks are excluded from this category 5-year MACRS Property with ADR midpoints of more than 4, but loss than 10 years Kay asts in this category include automobiles, loht trucks and techno logical equipment such as computers and research e d properties 7-year MACRS Property with ADR midpoints of 10 years of more, but less than 16 years. Most types of manufacturing equipment would tallinto this category, as would office furniture and tours 10-year MACRS Property with ADR midpoints of 16 years or more, but less than 20 yon. Petroleum ning products, r oad tank cars, and manufactured homes fall into this group. 15-year MACRS Property with ADR midpoints of 20 years or more, but less than 25 years. Land improvement, pipeline distribution, telephone distribution and sewage treatment plants al belong in this category 20-year MACRS Property with ADR midpoints of 25 years of more with the exception of real estate, which is treated separately. Key investments in this cat egory include electric and gas uity property and sewer pipes 27 5-year Residential rental property If 80% or more of the gross rental incomes MACRS from notransient dwelling units (e.., an apartment building: low. income housing. 31.5-year Nonresidential real property that has no ADR class life or whose class MACRS life is 275 years or more. 39-year MACRS Nonresidential real property placed in service after May 12, 1993 Tablo 12-12 Depreciation percentages (expressed in decimals) Depreciation Year 3-Year MACRS 5-Year 7-Year 10-Year 15-Year 20-Year MACRS MACRS MACRS MAGAS MACRS 0.143 0.245 0.333 0.445 0.148 0.074 0.200 0.320 0.192 0.115 0.11$ 0.058 0.175 0.125 0.089 0.089 0.089 0.100 0.180 0.144 0.115 0.092 0.074 0.006 0.006 0.005 0.065 0.033 0.045 0.050 0.095 0.086 0.077 0.00 0.062 0.059 0.050 0.050 0.000 0.059 0.059 0.059 0.050 0.050 0.038 0.072 0.067 0.062 0.057 0.053 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.017 0.030 1.000 1.000 1.000 1.000 1.000