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The Woodruff Corporation purchased a piece of equipment three years ago for $227,000. It has an asset...

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Accounting

The WoodruffCorporation purchased a piece of equipment three years ago for$227,000. It has an asset depreciation range (ADR) midpoint ofeight years. The old equipment can be sold for $94,500.

A new piece of equipment can be purchased for $305,500. It also hasan ADR of eight years.

Assume the old and new equipment would provide the followingoperating gains (or losses) over the next six years:

  
YearNewEquipmentOldEquipment
1...............$78,250$26,750
2...............75,50014,500
3...............71,7509,500
4...............60,2506,250
5...............50,2506,750
6...............45,750-7,000

The firm has a 36percent tax rate and a 9 percent cost of capital.

What is the netcost of the new equipment? Round your solution to two decimalplaces.

What is thepresent value of incremental benefits? Round your solution to twodecimal places.

What is the NPVof this replacement decision? Round your solution to two decimalplaces.

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