DataPoint Engineering is considering the purchase of a new piece of equipment for $200,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $100,000 in nondepreciable working capital. $25,000 of this investment will be recovered 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. Use Table 12–11, Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
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Year |
Amount |
1 |
$ |
173,000 |
|
2 |
|
152,000 |
|
3 |
|
108,000 |
|
4 |
|
103,000 |
|
5 |
|
89,000 |
|
6 |
|
71,000 |
|
|
The tax rate is 25 percent. The cost of capital must be computed based on the following:
|
|
Cost
(aftertax) |
Weights |
Debt |
K
d
|
|
5.50 |
% |
|
30 |
% |
Preferred stock |
K
p
|
|
9.20 |
|
|
10 |
|
Common equity (retained earnings) |
K
e
|
|
14.00 |
|
|
60 |
|
|
a.Determine the annual depreciation schedule.(Do not round intermediate calculatio
ns. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.)
|
|
Year |
Depreciation Base |
Percentage Depreciation |
Annual Depreciation |
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
|
|
5 |
|
|
|
6 |
|
|
|
|
|
|
$0 |
|
b.Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6.(Do not round in
termediate calculations and round your answers to 2 decimal places.)
c.Determine the weighted average cost of capital.(Do not round intermediate calculations. E
nter your answer as a percent rounded to 2 decimal places.)
d-1.Determine the net present value.(Use the WACC from 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.)
Extracted text: Table 12-12 Depreciation percentages (expressed In declmals) 7-Year Depreciation Year 3-Year 5-Year 10-Year 15-Year 20-Year MACRS MACRS MACRS MACRS MACRS MACRS 1 ...... 0.333 0.200 0.143 0.100 0.050 0.038 0.445 0.320 0.245 0.180 0.095 0.072 0.148 0.192 0.175 0.144 0.086 0.067 0.074 0.115 0.125 0.115 0.077 0.062 ..* *****W 0.115 0.089 0.092 0.069 0.057 0.058 0.089 0.074 0.062 0.053 7. 0.089 0.066 0.059 0.045 T:TO_BLURR * E 8. 0.045 0.066 0.059 0.045 6. 0.065 0.059 0.045 10 0.065 0.059 0.045 11 0.033 0.059 0,045 12 0.059 0.045 13 0.045 14 0.059 0.045 15 0.059 0.045 16 0.030 0.045 17 0.045 18 0.045 19 0.045 20 0.045 21 0.017 1.000 1.000 1.000 1.000 1.000 1.000 30 stv A OG w 20 F3 000 F2 F4 F5 F6 F7 F8 2.
Extracted text: m edaConnes Production/bne/tinance/block_ 17e/Block17e AppB.pdr d- Student... EveryDollar Sunrise Elementary ParentVUE Other Bookmarks Re 1/ 2 99% Open in Acrobat Appendix B Present value of $1, PVF 1 PV = FV (1+"] Percent Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.942 0.888 0.837 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 9. 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218 0.188 0.163 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198 0.170 0.146 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180 0.153 0.130 19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164 0.138 0.116 20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149 0.124 0.104 25 0.780 0.610 0.478 0.375 0.295 0.233 0.184 0.146 0.116 0.074 0.059 760 30 0.742 0.552 0.412 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0.044 0.033 40 0.672 0.453 0.307 0.208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 50 0.608 0.372 0.228 0.141 0.087 0.054 0.034 0.021 0.013 0.009 0.005 0.003 etv A O MacBook Air O00 O00 F4 II F8 F5 F6 F7 F9 F10