DataPoint Engineering is considering the purchase of a new piece of equipment for $360,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $180,000 in nondepreciable working capital. $65,000 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 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. The tax rate is 25 percent. The cost of capital must be computed based on the following: d-1. Determine the net present value. Note: 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 Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $80,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $35,800. A new piece of equipment will cost $240,000. It also falls into the fiveyear category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12-12. Use AppendixB for an approximate answer but calculate your final answer using the formula and financial calculat methods. The firm's tax rate is 25 percent and the cost of capital is 9 percent. a. What is the book value of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. b. What is the tax loss on the sale of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. c. What is the tax benefit from the sale? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. d. What is the cash inflow from the sale of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. e. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment.) Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. f. Determine the depreciation schedule for the new equipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. f. Determine the depreciation schedule for the new equipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. g. Determine the depreciation schedule for the remaining years of the old equipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. shield benefits. Note: Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar. i. Compute the aftertax benefits of the cost savings. Note: Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar. j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. Note: Do not round intermediate calculations and round your answers to the nearest whole dollar. j-2. Compute the present value of the total annual benefits. Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. k-1. Compare the present value of the incremental benefits (j) to the net cost of the n (e). Note: Do not round intermediate calculations. Negative amount should be indicate sign. Round your answer to the nearest whole dollar. j-2. Compute the present value of the total annual benefits. Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. k-1. Compare the present value of the incremental benefits (j) to the net cost of the new equipment (e). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar. k-2. Should the replacement be undertaken? Yes No DataPoint Engineering is considering the purchase of a new piece of equipment for $360,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $180,000 in nondepreciable working capital. $65,000 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 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. The tax rate is 25 percent. The cost of capital must be computed based on the following: d-1. Determine the net present value. Note: 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 Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $80,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $35,800. A new piece of equipment will cost $240,000. It also falls into the fiveyear category for MACRS depreciation. Assume the new equipment would provide the following stream of added cost savings for the next six years. Use Table 12-12. Use AppendixB for an approximate answer but calculate your final answer using the formula and financial calculat methods. The firm's tax rate is 25 percent and the cost of capital is 9 percent. a. What is the book value of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. b. What is the tax loss on the sale of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. c. What is the tax benefit from the sale? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. d. What is the cash inflow from the sale of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. e. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment.) Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. f. Determine the depreciation schedule for the new equipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. f. Determine the depreciation schedule for the new equipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. g. Determine the depreciation schedule for the remaining years of the old equipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. shield benefits. Note: Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar. i. Compute the aftertax benefits of the cost savings. Note: Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar. j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. Note: Do not round intermediate calculations and round your answers to the nearest whole dollar. j-2. Compute the present value of the total annual benefits. Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. k-1. Compare the present value of the incremental benefits (j) to the net cost of the n (e). Note: Do not round intermediate calculations. Negative amount should be indicate sign. Round your answer to the nearest whole dollar. j-2. Compute the present value of the total annual benefits. Note: Do not round intermediate calculations and round your answer to the nearest whole dollar. k-1. Compare the present value of the incremental benefits (j) to the net cost of the new equipment (e). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar. k-2. Should the replacement be undertaken? Yes No