Hercules Exercise Equipment Company purchased a computerized measuring device two years ago for $58,000. The equipment falls into the five-year category for MACRS depreciation and can currently be sold for $24,800. A new piece of equipment will cost $148,000. 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 $ 62,000

2 54,000

3 52,000

4 50,000

5 47,000

6 36,000

The firms tax rate is 25 percent and the cost of capital is 12 percent.