The Woodruff Corporation purchased a piece of equipment three years ago for $233,000. It has an asset depreciation range(ADR) midpoint of 8 years. The old equipment can be sold for $94000. A new piece of equipment can be purchased for $335,500. It also has an ADR of 8 years. Assume the old and new equipment would provide the following operating gains(or losses) over the next six years:

Year New Equipment Old Equipment

1 $78,750 $26,000

2 $76,250 $14,500

3 $68,250 $8,500

4 $59,000 $6,250

5 $51,250 $4,250

6 $44,250 $-8,250

The firm has a 25 percent tax rate and a 9% cost of capital.

1.What is the net cost of the new equipment?

2. What is the present value of incremental benefits?

3. What is the NPV of this replacement decision?