I realize what a long question this is, but I'd really appreciate getting some help through course hero on it. There are a few problems I cannot seem to be able to work my way through, this being one of them.
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $74,000. The equipment falls into the ve-year category for MACRS depreciation and can currently be sold for $32,800. A new piece of equipment will cost $210,000. It also falls into the ve-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 nancial calculator methods. Cash Year Savings 1 $ 70,000 62,000 60,000 58,000 55,000 44,000 ' 0301-!)th The rm's tax rate is 30 percent and the cost of capital is 13 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.) d. What is the cash inow from the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) e. What is the net cost of the new equipment? (Include the inow from the sale of the old equipment.) (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. (Round the depreciation base and annual depreciation answers to the nearest whole dollar. Round the percentage depreciation factors to 3 decimal places.) Depreciation Percentage Annual Depreciation Depreciation 9. 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 benets. (Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) i. Compute the aftertax benets of the cost savings. (Enter the aftertax factor as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) j-1. Add the depreciation tax shield benets and the aftertax cost savings to determine the total annual benets. (Do not round intermediate calculations and raund your answers to the nearest whole dollar.) j-2. Compute the present value of the total annual benets. (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Total annual benefits k-1. Compare the present value of the incremental benets (1) 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.) Total annual benefits
