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a ort ng nee g is considering the purchase of a new piece od equpment to 250.000. It has an eight-year midpoint of its asset depreciaton range A R ,R il equire an additional initial investment of $150,000 n nondepreciable or g cap tal. Thi y seven sand dollars o this investment will be recowered after the sixth year and will provide additional cash flow for that year. Income before depreciation and taxes for the next six are shown in the following table. Ue Table 12-11, Table 12-12. Use Appendx B for an appraximate anawer but calculate your final answer using the formula and financial calculator methods Year Amount $188,000 2 162.000 3 132,000 117,000 5 96,000 6 86,000 The tax rate is 30 percent. The cost of capital must be computed based on the ollowing: Cost (aartax) Weights Kd 10.50% 30% Debt Preterred stock Kp 14.20 Common equity (retained eanings) Ko 00 10 60 a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation anawers to 3 decimal places. Base b. Determine the annual cash fow for each year. Be sure to include the recovered working capital in Year 6. (Do not round intermediate calculations and round your answers to 2 decimal places.) G. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) average oost d-1. Determine the net present value. Use the WA C trom part c rounded to 2 decimal places as a percent as the cost of capital e.g 12.34%). Do not round any other intermediate calculations. Round your answer to 2 decimal places d-2. Should DataPoint purchase the naw equipment? Yes No Table 12-11 Categories for depreciation write-off Class 3-year MACRS 5-year MACRS All property with ADR midpoints of four years or less. Autos and light trucks are excluded from this category Property with ADR midpoints of more than 4, but less than 10 years. Key assets in this category include automobiles, light trucks, and techno- logical equipment such as computers and research-related properties 7-year MACRS Property with ADR midpoints of 10 years or more, but less than 16 years. Most types of manufacturing equipment would fall into this category, as would office furniture and fixtures. 10-year MACRS Property with ADR midpoints of 16 years or more, but less than 20 years. Petroleum refining products, railroad tank cars, and manufactured homes fall into this group. 15-year MACRS Property with ADR midpoints of 20 years or more, but less than 25 years. Land improvement, pipeline distribution, telephone distribution, and sewage treatment plants all belong in this category 20-year MACRS Property with ADR midpoints of 25 years or more (with the exception of real estate, which is treated separately). Key investments in this cat egory include electric and gas utility property and sewer pipes. 27.5-year Residential rental property if 80% or more of the gross rental income is MACRS from nontransient dwelling units (e.g., an apartment building); low- income housing. 31.5-year Nonresidential real property that has no ADR class life or whose class MACRS life is 27.5 years or more 39-year MACRS Nonresidential real property placed in service after May 12, 1993 Table 12-12 Depreciation percentages (expressed in decimals) Depreciation 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year MACRS MACRS MACRS MACRS MACRS MACRS Year 0.100 0.180 0.144 0.115 0.092 0.074 0.066 0.066 0.065 0.065 0.033 1 . 0.333 2 0.200 0.320 0.192 0.115 0.115 0.058 0.143 0.245 0.175 0.125 0.089 0.089 0.089 0.045 0.050 0.095 0.086 0.077 0.069 0.062 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.030 0.038 0.072 0.067 0.062 0.057 0.053 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.017 1.000 0.445 4 6 10.. 13 16. 18 20 21 1.000 1.000 1.000 1.000 1.000 Appendix B Present value of $1, PV PV-FV 20.783 0.769 0.756 0.743 0731 0718 0.706 0.694 0640 0.592 0549 0.510 0.444 3 - 0.693 0.675 0.658 0.641 0.624 0609 0.593 0.579 0.512 0.455 0.406 0.364 0.296 0,613 0.592 0.572 0.552 0.534 0.515 0.499 0.482 0410 0350 0301 0260 0.198 0.543 0.519 0497 0.476 0.456 0.437 0.419 0.402 0328 0269 0223 0.186 0.132 0.480 0,456 0432 0.410 0.390 0370 0.352 0.335 0262 0.207 0165 0.133 0.088 0.425 0,400 0.376 0.354 0.333 0314 0.296 0279 0210 0.159 0122 0095 0.059 0.376 0.351 0327 0.305 0285 0266 0.249 0.233 0.168 0.123 0091 0068 0.039 0.333 0.308 0284 0.263 0243 0225 0.209 0.194 0.134 0.094 0067 0.048 0.026 00.295 0.270 0247 0227 0208 .191 0.176 0.12 0.107 0.073 0060 0.035 0.017 10.261 0237 0215 0.195 0.178 0162 0.148 0.135 0.086 0.056 037 0.025 0.012 20.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0060 0.043 0.027 0018 0.006 0.204 0.182 0.163 0.145 0.130 0116 0.104 0.093 0055 0.033 0.020 0.013 0.006 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0044 0.025 0.015 0.009 0.003 0.160 0.140 0123 0.108 0.095 0.084 0.074 0.065 0035 0.020 0.011 0.006 0.002 0.141 0.123 0107 0.093 0081 0.071 0.062 0.064 0028 0.015 0.008 0.005 0.002 0.125 0.108 0.093 0.080 0.069 0060 0.052 0.045 0023 0.012 0.008 0003 0.00 180.111 0.095 0081 0.069 0.069 0051 0.044 0.038 0.018 0.009 0.005 0.002 0.00 0.098 0,083 0070 0.060 .051 0.043 0.037 0.031 0.014 0.007 0.003 0.00 0 0.0870.073 0061 0051 0.043 0.0370.031 0.026 0.012 0.005 0.002 0.00 0 0