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https://www.chegg.com/homework-help/questions-and-answers/hercules-exercise-equipment-co-purchased-computerized-measuring-device-two-years-ago-76-00-q42820784 Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $76,000. The equipment falls into the five-year category for MACRS depreciation

https://www.chegg.com/homework-help/questions-and-answers/hercules-exercise-equipment-co-purchased-computerized-measuring-device-two-years-ago-76-00-q42820784

Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $76,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $33,800. A new piece of equipment will cost $150,000. 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

$

60,000

2

50,000

3

48,000

4

46,000

5

43,000

6

32,000

The firms tax rate is 25 percent and the cost of capital is 14 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.)

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