Reference no: EM132485620

Point 1: Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $72,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $31,800. A new piece of equipment will cost $200,000. 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 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

• The firm's tax rate is 25 percent and the cost of capital is 12 percent.

Question 1: 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.)

Question 2: 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.)

Question 3: 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.)