Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $$82,000.$ The equipment falls into the five$-$year category for MACRS depreciation and can currently be sold for $$36,800.$ A new piece of equipment will cost $$250,000.$ 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

$1$ $ $63,000$

$253,000$

$351,000$

$449,000$

$546,000$

$635,000$

The firm$$s tax rate is $25$ percent and the cost of capital is $8$ 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?

d$.$ What is the cash inflow from the sale of the old equipment?

e$.$ What is the net cost of the new equipment? $($Include the inflow from the sale of the old equipment.$)$

f$.$ Determine the depreciation schedule for the new equipment.

g$.$ Determine the depreciation schedule for the remaining years of the old equipment.

h$.$ Determine the incremental depreciation between the old and new equipment and the related tax shield benefits

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

j$-1.$ Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits.