The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

 DataPoint Engineering is considering the purchase of a new piece of equipment for \$230,000. It has an eight-year midpoint of its asset depreciation range (ADR). It will require an additional initial investment of \$130,000 in nondepreciable working capital. Thirty-two thousand dollars 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 12–12. UseAppendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

 Year Amount 1 \$ 182,000 2 158,000 3 128,000 4 113,000 5 94,000 6 84,000

 The tax rate is 30 percent. The cost of capital must be computed based on the following:

 Cost (aftertax) Weights Debt Kd 8.50 % 30 % Preferred stock Kp 12.20 20 Common equity (retained earnings) Ke 17.00 50

 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.)

 Year Depreciation Base Percentage Depreciation Annual Depreciation 1 \$ \$ 2 3 4 5 6 \$

 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.)

 Year Cash Flow 1 \$ 2 3 4 5 6

 c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 Weighted average cost of capital %

 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.)

 Net present value \$

d-2. Should DataPoint purchase the new equipment?
 Yes

GET HELP WITH THIS ASSIGNMENT TODAY

Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.