DataPoint Engineering is considering the purchase of a new piece of equipment for $$210,000.$ It has an eight$-$year midpoint of its asset depreciation range $($ADR$).$ It will require an additional initial investment of $$110,000$ in nondepreciable working capital. $$27,000$ 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

$1$ $ $176,000$

$2154,000$

$3124,000$

$4109,000$

$592,000$

$682,000$

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

Cost $($aftertax$)$ Weights

Debt Kd $6\mathrm{.}40\%40\%$

Preferred stock Kp $10\mathrm{.}4010$

Common equity $($retained earnings$)$ Ke $13\mathrm{.}0050$

a$.$ Determine the annual depreciation schedule.

Note: 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 $6.$

Note: Do not round intermediate calculations and round your answers to $2$ decimal places.

c$.$ Determine the weighted average cost of capital.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to $2$ decimal places.

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. Do not round intermediate calculations and round your final answer to $2$ decimal places.

d$-2.$ Should DataPoint purchase the new equipment?

multiple choice

Yes

No