Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $66.000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $28,800. A new piece of equipment will cost $156,000. It also falls into the five-year 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 Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year 1 2 3 4 5 6 Cash Savings $ 66,080 58,000 56,080 54,080 51,000 40,000 The firm's tax rate is 25 percent and the cost of capital is 9 percent. e. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) X Answer is complete but not entirely correct. Net cost $ 126,048 i. Compute the aftertax benefits of the cost savings. (Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) Year 1 | Answer is complete but not entirely correct. Aftertax (1 - Tax Savings Rate) Savings 66,000 0.60 X $ 39,600 x 58.000 0.60 X 34,800 56,000 0.60 X 33.600 X 54,000 0.60 X 32,400 X 51.000 0.60 30,600 X 40.000 0.60 X 24,000 4 ch 6 j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) Year 1 Answer is complete but not entirely correct. Tax Shield Benefits Aftertax Cost from Total Annual Benefits Depreciation Savings 7,411 X 39,600 $ 47,011 X 16,932 34,800 51,732 8,945 33,600 42,545 X 5,645 X 32,400 X 38,045 % 7,176 30,600 37.776 X 3,619 24,000 27,619 X 2 3 4 5 6 j-2. Compute the present value of the total annual benefits. (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Answer is complete but not entirely correct. Present value s 61,448 % k-1. Compare the present value of the incremental benefits (i) to the net cost of the new equipment (e) (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Net present value Table 12-12 Depreciation percentages (expressed in decimals) Depreciation Year 3-Year MACRS 5-Year MACRS 7-Year MACRS 10-Year MACRS 15-Year MACRS 0.050 20-Year MACRS 2 0.333 0.445 0.148 0.074 0.095 2 3 4 5 6 7 0.200 0.320 0.192 0.115 0.115 0.058 0.143 0.245 0.175 0.125 0.089 0.089 0.089 0.045 0.100 0.180 0.144 0.115 0.092 0.074 0.066 0.066 0.065 0.065 0.033 0.086 0.077 0.069 0.062 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.030 0.038 0.072 0.067 0.062 0.057 0.053 0.045 0.045 0.045 0.045 10 11.. 12 13 0.045 14 15 16 17 18 19 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.017 1.000 20... 21 1.000 1.000 1.000 1.000 1.000 Appendix 3 Present value of $1, PV, PVFV 5% Period 1 2 3 4 5 6 7 8 10 11 TX 0.990 0980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 0.780 0.742 0.672 0.608 12. 2% 0980 0.961 0.942 0.924 0906 0888 0871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 0.610 0.552 0.453 0.372 3% 0.971 0943 0915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.581 0.661 0.642 0523 0.605 0.587 0.570 0554 0.478 0.412 0.307 0.228 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 0.375 0.308 0.208 0.141 Percent 6% 7% 0.943 0.935 0.890 0.873 0.840 0.816 0.792 0.763 0.747 0.713 0.705 0.666 0.665 0.623 0.627 0582 0.592 0544 0.558 0.508 0.527 0.475 0.497 0.444 0.469 0.415 0.442 0.388 0.417 0.362 0.394 0.339 0.371 0.317 0.350 0.296 0.331 0.277 0.312 0.258 0.233 0.184 0.174 0.131 0.097 0.067 0.054 0.034 0.952 0.907 0.864 0.823 0.784 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 0.458 0.436 0.416 0.396 0377 0.295 0.231 0.142 0.087 8% 0.926 0.857 0.794 0.735 0.681 0.630 0583 0.540 0.500 0.463 0.429 0397 0.368 0340 0.315 0.292 0.270 0.250 0.232 0.215 0.146 0.099 0.046 0.021 9% 0.917 0.842 0.772 0.708 0.650 0.596 0547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 0.116 0075 0.032 0.013 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 0.092 0.057 0.022 0.009 11% 0901 0.812 0.731 0.659 0.593 0535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 0.074 0.044 0.015 0.005 0.893 0.797 0.712 0.636 0.567 0507 0,452 0.404 0.361 0.322 0287 0257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 Q059 0.033 0.011 0.003 13 14 15 16 17 18 m 19 20 25 30 40 50