Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $$62,000.$ The equipment falls into the five$-$year category for MACRS depreciation and can currently be sold for $$26,800.$ A new piece of equipment will cost $$152,000.$ 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

$1$ $ $64,000$

$256,000$

$354,000$

$452,000$

$549,000$

$638,000$

The firm$$s tax rate is $25$ percent and the cost of capital is $14$ percent.

A$.$ What is the book value of the old equipment?

B$.$ What is the tax loss on the sale of the old equipment?

c$.$ What is the tax benefit from the sale?

Note: 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?

Note: 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.$)$ Note: 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.

Note: Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to $3$ decimal places.

$\backslash$table$[[$Year$,\backslash$table$[[$Depreciation$],[$Base$]],\backslash$table$[[$Percentage$],[$Depreciation$]],\backslash$table$[[$Annual$],[$Depreciation$]]],[1,,,],[2,,,],[3,,,],[4,$

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 dollar.

$\backslash$table$[[$Year$,\backslash$table$[[$Depreciation$],[$on New$],[$Equipment$]],\backslash$table$[[$Depreciation$],[$on Old$],[$Equipment$]],\backslash$table$[[$Incremental$],[$Depreciation$]],$Tax Rate,$\backslash$table$[[$Tax Shield$],[$Benefits$]]],[1,,,,,],[2,,,,,],[3,,,,,],[4,,,,,],[5,,,,,],[6,,,,,]]$

i$.$ Compute the aftertax benefits of the cost savings.

Note: Enter the aftertax factor as a decimal rounded to $2$ decimal places. Round all other answers to the nearest whole dollar.

$\backslash$table$[[$Year$,$Savings,$(1-$ Tax Rate$),$Aftertax Savings$],[1,64,000,,],[2,56,000,,],[3,54,000,,],[4,52,000,,],[5,49,000,,],[6,38,000,,]]$

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.

$\backslash$table$[[$Year$,\backslash$table$[[$Tax Shield$],[$Benefits from$],[$Depreciation$]],\backslash$table$[[$Aftertax Cost$],[$Savings$]],\backslash$table$[[$Total Annual$],[$Benefits$]]],[1,,,],[2,,,],[3,,,],[4,,,],[5,,,],[6,,,]]$

j$-2.$ Compute the present value of the total annual benefits.

Note: 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$).$

Note: 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

$,,],[5,,,],[6,,,],[,,,$$