Hercules Exercise Equipment Co. purchased a computerized measuring device two years ago for $90,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $40,800. A new piece of equipment will cost $235,000. 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 1212. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Year		Cash Savings
1		$	67,000
2			57,000
3			55,000
4			53,000
5			50,000
6			39,000

The firms tax rate is 25 percent and the cost of capital is 14 percent.

h. Determine the incremental depreciation between the old and new equipment and the related tax shield benefits. (Enter the tax rate as a decimal rounded to 2 decimal places. Round all other answers to the nearest whole dollar.) Year Incremental Depreciation Tax Rate Depreciation on Old Equipment $ 17,280 Tax Shield Benefits Depreciation on New Equipment $ 47,000 75,200 45,120 1 $ 0.25 $ 2 29,720 64,832 34,752 0.25 7,430 16,208 8,688 3 0.25 4 0.25 5 0 0.25 6 0 0.25 j-1. Add the depreciation tax shield benefits and the aftertax cost savings to determine the total annual benefits. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) Year Tax Shield Benefits from Depreciation 7,430 Aftertax Cost Savings Total Annual Benefits 1 50,250 $ 42,750 57,680 58,958 2 16,208 3 8,688 41,250 49,938 4 5 39,750 37,500 29,250 45,222 44,268 32,634 6 k-1. Compare the present value of the incremental benefits (j) to the net cost of the new equipment (e). (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar.) Net present value