e - k2

Problem 12-31 (Static) Replacement decision analysis [LO12-4] Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $58,000. The equipment falls Into the five-year category for MACRS depreciation and can currentity be sold for $24,800. A new piece of equipment will cost $148.000. it also falis into the five-year category for MACRS depreclation. Assume the new equipment would provide the folfowing stream of added cost savings for the next six years. Use Table 12-12 Use Aprendix B for an approximate answer but catculate your final answer using the formitia and financial calculator methods. The firm's tax rate is 25 percent and the cost of capital is 12 percent. o. What is the book value of the old equipment? Note: Do not round intermediate colculotions and round your answer to the nearest whole dollar. b. Whot is the tax loss on the sale of the old equipmenr? Note: Do not round intermediote colculotions and round your answor 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. (Q) Answer is complete and correct- d. What is the cash infiow from the sale of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole clollar. 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 cquipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollor. Round the percentage depreciation factors to 3 decimal places. 9. Determine the depreciation schedule for the remaining years of the old equipment. Note: Round the depreciation bose and smnual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits Note: Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole doliar. 1. Compute the aftertax benefits of the cost savings Note: Enter the aftertax foctor as a decimal rounded to 2 decimol places. Round oll other answers to the nearest whole dollak. 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 final answer to 2 decimal places. k-1. Compare the present value of the incremental benefits (i) to the net cost of the new equipment (e). J-2. Compute the present value of the totul annual bent fits Note: Do not round intermediate calculations and round your final answer to 2 decimal places. k-1. Compare the present value of the incrementiai benefits (0) to the net cost of the new equipment (e). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus slgn. Round your answer to 2 decimal places. k-2. Should the replacement be undertaken? Table 12-12 Depreciation nercentages (expressed in decimals) PY=17[1[1+m] Problem 12-31 (Static) Replacement decision analysis [LO12-4] Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $58,000. The equipment falls Into the five-year category for MACRS depreciation and can currentity be sold for $24,800. A new piece of equipment will cost $148.000. it also falis into the five-year category for MACRS depreclation. Assume the new equipment would provide the folfowing stream of added cost savings for the next six years. Use Table 12-12 Use Aprendix B for an approximate answer but catculate your final answer using the formitia and financial calculator methods. The firm's tax rate is 25 percent and the cost of capital is 12 percent. o. What is the book value of the old equipment? Note: Do not round intermediate colculotions and round your answer to the nearest whole dollar. b. Whot is the tax loss on the sale of the old equipmenr? Note: Do not round intermediote colculotions and round your answor 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. (Q) Answer is complete and correct- d. What is the cash infiow from the sale of the old equipment? Note: Do not round intermediate calculations and round your answer to the nearest whole clollar. 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 cquipment. Note: Round the depreciation base and annual depreciation answers to the nearest whole dollor. Round the percentage depreciation factors to 3 decimal places. 9. Determine the depreciation schedule for the remaining years of the old equipment. Note: Round the depreciation bose and smnual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places. h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits Note: Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole doliar. 1. Compute the aftertax benefits of the cost savings Note: Enter the aftertax foctor as a decimal rounded to 2 decimol places. Round oll other answers to the nearest whole dollak. 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 final answer to 2 decimal places. k-1. Compare the present value of the incremental benefits (i) to the net cost of the new equipment (e). J-2. Compute the present value of the totul annual bent fits Note: Do not round intermediate calculations and round your final answer to 2 decimal places. k-1. Compare the present value of the incrementiai benefits (0) to the net cost of the new equipment (e). Note: Do not round intermediate calculations. Negative amount should be indicated by a minus slgn. Round your answer to 2 decimal places. k-2. Should the replacement be undertaken? Table 12-12 Depreciation nercentages (expressed in decimals) PY=17[1[1+m]