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Problem 12-30 Working capital requirements in capital budgeting [LO124] The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $260,000. Of this amount, $210,000 is subject to five-year MACRS depreciation. The balance is in nondepreciable property. The contract covers six years; at the end of six years, the nondepreciable assets will be sold for $50,000. The depreciated assets will have zero resale value. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. The contract will require an additional investment of $56,000 in working capital at the beginning of the first year and, of this amount, $36,000 will be returned to the Spartan Technology Company after six years. The investment will produce $81,000 in income before depreciation and taxes for each of the six years. The corporation is in a 25 percent tax bracket and has a 6 percent cost of capital. a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.) Problem 12-32 Capital budgeting with cost of capital computation [LO125] DataPoint Engineering is considering the purchase of a new piece of equipment for $290,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of $190,000 in nondepreciable working capital. $47,000 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 1212. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. The tax rate is 25 percent. The cost of capital must be computed based on the following: a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.) b. Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6 . (Do not round intermediate calculations and round your answers to 2 decimal places.) c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter 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.) d-2. Should DataPoint purchase the new equipment? Yes/No

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