Question: Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $62,000. The equipment falls into the tive-year category for MACRS depreciation and




Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $62,000. The equipment falls into the tive-year category for MACRS depreciation and can currently be sold for $26,800. A new plece of equipment will cost $152,000. 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 fo an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Savings 1S 64,000 54,000 49,000 38,000 The firm's tax rate is 30 percent and the cost of capital is 14 percent. a. What is the book value of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Book value S29,760 b. What is the tax loss on the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Tax loss c. What is the tax benefit from the sale? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Tax benefit d. What is the cash infiow from the sale of the old equipment? (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Cash inflow
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