Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $74,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $32,800. A new piece of equipment will cost $210,000. 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 1212. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year WNH 1 2 3 4 5 6 Cash Savings $70,000 62,000 60,000 58,000 55,000 44,000 01 The firm's tax rate is 25 percent and the cost of capital is 13 percent. a. What is the book value of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Book value b. What is the tax loss on the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Tax loss c. What is the tax benefit from the sale? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Tax benefit d. What is the cash inflow from the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Cash inflow 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.) Net cost f. Determine the depreciation schedule for the new equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) X Answer is not complete. Year Depreciation Base Percentage Depreciation Annual Depreciation 1 2. 3 4 5 6 $ 0 g. Determine the depreciation schedule for the remaining years of the old equipment. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) Year Depreciation Base Percentage Depreciation Annual Depreciation 1 2 3 4 h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits. (Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) X Answer is complete but not entirely correct. Year Depreciation on New Equipment S 42,000 Depreciation on Old Equipment $ 14.208 Incremental Depreciation Tax Rate Tax Shield Benefits 1 $ 27,792 0.30 X $ 8,338 X 2 67.200 8,510 58,690 0.30 X 3 17,607 X 40,320 OOO 8,510 31,810 0.30 X 9,543 X 4 24.150 4.292 19,858 0.30 X 5,957 X 5 24.150 0.30 X 7,245 X 6 12,180 24,150 12,180 0.30 X 3,654 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.) X Answer is complete but not entirely correct. Year Savings Aftertax Savings 49,000 X 1 S 70,000 2 2 43,400 3 62,000 60.000 58,000 (1 - Tax Rate) 0.70 X $ 0.70 X 0.70 X 0.70 X 0.70 X 0.70 X 42.000 4 5 40,600 X 38,500 X 55.000 6 44,000 30,800 X 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 Tax Shield Benefits from Depreciation Aftertax Cost Savings Total Annual Benefits 1 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.) Present value k-1. Compare the present value of the incremental benefits (j) 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