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.) 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 Base Percentage Depreciation Annual Year Depreciation 1 2. 3. 4.
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.) 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 Base Percentage Depreciation Annual Year Depreciation 1 2. 3. 4.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Transcription for Educational Website
#### Equipment Cost Analysis and Depreciation Schedule
**Section e: Net Cost of New Equipment**
To calculate the net cost of the new equipment, include the inflow from the sale of the old equipment. Be sure not to round intermediate calculations and provide your answer to the nearest whole dollar.
- **Net cost**: [Enter calculated value here]
---
**Section f: Depreciation Schedule for New Equipment**
Prepare the depreciation schedule for the new equipment by completing the following table. Make sure to round the depreciation base and annual depreciation answers to the nearest whole dollar. Additionally, round the percentage depreciation factors to three decimal places.
| Year | Depreciation Base | Percentage Depreciation | Annual Depreciation |
|------|-------------------|-------------------------|---------------------|
| 1 | | | |
| 2 | | | |
| 3 | | | |
| 4 | | | |
| 5 | | | |
Fill in the fields with the appropriate values for a comprehensive view of the equipment's depreciation over time.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b07311e-f579-4ac8-b710-7e0c1ec8bc92%2Fbdad6263-4f6d-4e19-840a-0c3ca1665405%2Fd4cxqpd_processed.png&w=3840&q=75)
Transcribed Image Text:### Transcription for Educational Website
#### Equipment Cost Analysis and Depreciation Schedule
**Section e: Net Cost of New Equipment**
To calculate the net cost of the new equipment, include the inflow from the sale of the old equipment. Be sure not to round intermediate calculations and provide your answer to the nearest whole dollar.
- **Net cost**: [Enter calculated value here]
---
**Section f: Depreciation Schedule for New Equipment**
Prepare the depreciation schedule for the new equipment by completing the following table. Make sure to round the depreciation base and annual depreciation answers to the nearest whole dollar. Additionally, round the percentage depreciation factors to three decimal places.
| Year | Depreciation Base | Percentage Depreciation | Annual Depreciation |
|------|-------------------|-------------------------|---------------------|
| 1 | | | |
| 2 | | | |
| 3 | | | |
| 4 | | | |
| 5 | | | |
Fill in the fields with the appropriate values for a comprehensive view of the equipment's depreciation over time.
![**Problem 12-33 Replacement Decision Analysis [LO12-4]**
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $78,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $34,800. A new piece of equipment will cost $230,000. 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.
Refer to **Table 12-12** and **Appendix B** for an approximate answer but calculate your final answer using the formula and financial calculator methods.
| Year | Cash Savings |
|------|--------------|
| 1 | $61,000 |
| 2 | $51,000 |
| 3 | $49,000 |
| 4 | $47,000 |
| 5 | $44,000 |
| 6 | $33,000 |
The firm’s tax rate is 25 percent and the cost of capital is 10 percent.
**Explanation of the Information Provided:**
The table highlights the expected cash savings resulting from the replacement of equipment over a six-year period. Each year’s savings are estimated as follows:
- Year 1: $61,000
- Year 2: $51,000
- Year 3: $49,000
- Year 4: $47,000
- Year 5: $44,000
- Year 6: $33,000
The problem involves analyzing these cash flows and the associated costs and tax effects to decide whether the company should replace the existing equipment with a new one. Financial metrics such as Net Present Value (NPV) or Internal Rate of Return (IRR) are commonly used to make such investment decisions. The firm has a tax rate of 25% and applies a discount rate (cost of capital) of 10% to evaluate investment opportunities.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b07311e-f579-4ac8-b710-7e0c1ec8bc92%2Fbdad6263-4f6d-4e19-840a-0c3ca1665405%2Fmo0o7k_processed.png&w=3840&q=75)
Transcribed Image Text:**Problem 12-33 Replacement Decision Analysis [LO12-4]**
Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $78,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $34,800. A new piece of equipment will cost $230,000. 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.
Refer to **Table 12-12** and **Appendix B** for an approximate answer but calculate your final answer using the formula and financial calculator methods.
| Year | Cash Savings |
|------|--------------|
| 1 | $61,000 |
| 2 | $51,000 |
| 3 | $49,000 |
| 4 | $47,000 |
| 5 | $44,000 |
| 6 | $33,000 |
The firm’s tax rate is 25 percent and the cost of capital is 10 percent.
**Explanation of the Information Provided:**
The table highlights the expected cash savings resulting from the replacement of equipment over a six-year period. Each year’s savings are estimated as follows:
- Year 1: $61,000
- Year 2: $51,000
- Year 3: $49,000
- Year 4: $47,000
- Year 5: $44,000
- Year 6: $33,000
The problem involves analyzing these cash flows and the associated costs and tax effects to decide whether the company should replace the existing equipment with a new one. Financial metrics such as Net Present Value (NPV) or Internal Rate of Return (IRR) are commonly used to make such investment decisions. The firm has a tax rate of 25% and applies a discount rate (cost of capital) of 10% to evaluate investment opportunities.
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