Question
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $58,000. The equipment falls into the five-year category for MACRS depreciation and
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $58,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $24,800. |
A new piece of equipment will cost $148,000. 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 | $62,000 |
2 | 54,000 |
3 | 52,000 |
4 | 50,000 |
5 | 47,000 |
6 | 36,000 |
The firms tax rate is 35 percent and the cost of capital is 12 percent. |
a. | What is the book value of the old equipment?
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started