Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $52,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $21,800. A new piece of equipment will cost $142,000. 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		Cash Savings
1		$	59,000
2			51,000
3			49,000
4			47,000
5			44,000
6			33,000

The firms tax rate is 25 percent and the cost of capital is 9 percent.

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.)

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.)

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.)

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.)

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.)

Table 12-12 Depreciation percentages (expressed in decimals) 3-Year 5-Year 7-Year 10-Year 20-Year Depreciation Year 15-Year MACRS MACRS MACRS MACRS MACRS MACRS 1 0.333 0.200 0.143 0.100 0.050 0.038 0.445 0.320 0.245 0.180 0.095 0.072 3 0.148 0.192 0.175 0.144 0.067 0.086 0.077 4 0.074 0.115 0.125 0.115 0.062 000 N 5 0.115 0.089 0.092 0.069 0.057 0.058 0.089 0.074 0.062 0.053 0.089 0.066 0.059 0.045 0.045 0.066 0.059 0.045 9 0.065 0.045 10 0.065 0.045 0.059 0.059 0.059 0.059 11 0.033 0.045 12 0.045 13 0.059 0.045 14 0.059 0.045 w 15 0.059 0.045 16 0.030 0.045 17 0.045 18 0.045 0.045 19 20 0.045 21 0.017 1.000 1.000 1.000 1.000 1.000 1.000 3 f. Determine the depreciation schedule for the new equipment. (Round the deprecia the nearest whole dollar. Round the percentage depreciation factors to 3 decimal Answer is complete but not entirely correct. 8 Ints Year Depreciation Base Percentage Annual Depreciation Depreciation 20.000 $ 28,400 1 $ 142,000 2 113,600 32.000 5,440 3 68,160 19.200 27,264 4 11.520 X 16,358 40,896 % 24,538 > 5 11.520 16,358 6 8,179 5.760 8,179 $ 101,999 3 g. Determine the depreciation schedule for the remaining years of the old equipment.( depreciation answers to the nearest whole dollar. Round the percentage depreciatior Answer is complete but not entirely correct. nts Year Depreciation Base 1 $ 24.960 X Percentage Annual Depreciation Depreciation 19.200 $ 9,984 11.520 5,990 X 11.520 % 5,990 % 5.760 X 2,995 x 2 2 14,976 3 8,986 % 2,995 X 4 4 3 h. Determine the incremental depreciation between the old and new equipment and the related tax shield b as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) Answer is not complete. 3 Ints Year Tax Rate Tax Shield Benefits 1 $ 4,604 2 9,862 Depreciation Depreciation Incremental on New on Old Depreciation Equipment Equipment $ 28,400 $ 9,984 $ 18,416 45,440 5,990 39,450 27,264 5,990 X 21,274 16,358 X 2.995 13,363 16,358 X 0 16,358 X 8,179 8,179 X 3 >>IX 5,318 4 x 5 3,341 X 4,090 X 2,045 X 6 3 j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the intermediate calculations and round your answers to the nearest whole dollar.) Answer is complete but not entirely correct. Ints Year Tax Shield Benefits from Depreciation 4,604 Aftertax Cost Savings Total Annual Benefits 1 44,250 $ 48,854 2 2. 9,862 38,250 48,112 3 3 5,318 36,750 42,068 4 35,250 38,591 5 3,341 X 4,090 X 2,045 33,000 5 6 37,090 6 24,750 26,795 3 k-1. Compare the present value of the incremental benefits (j) to the net calculations. Negative amount should be indicated by a minus sign. Ro 3 Answer is complete but not entirely correct. nts Net present $ 64,511 value