Question

Please evaluate below questions. 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.)

1/(1+0.1306)^1 = 0.88448611356

1/(1+0.1306)^2 = 0.78231568509

1/(1+0.1306)^3 = 0.69194735989

1/(1+0.1306)^4 = 0.61201783114

1/(1+0.1306)^5 = 0.5413212729

1/(1+0.1306)^6 = 0.47879114886

170000 * 0.88448611356 = 150362.64

155300 * 0.78231568509 = 121493.63

122880 * 0.69194735989 = 85026.49

105662.5 * 0.61201783114 = 64667.33

85412.5 * 0.61201783114 = 52273.97

125495 * 0.47879114886 = 60085.90

150362.64 + 121493.63 + 85026.49 + 64667.33 + 52273.97 + 60085.9 = 533909.96

NPV = 533909.96 - 440000 = 93909.96 <----------------------------Please confirm if this is correct answer

DataPoint Engineering is considering the purchase of a new piece of equipment for $310,000. 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. $52,000 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 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. Amount Year 1 2 $206,000 174,000 144,000 129,000 102,000 92,000 4 л 6 The tax rate is 25 percent. The cost of capital must be computed based on the following: Debt Preferred stock Common equity (retained earnings) Kd кр Ke Cost (aftertax) 8.30% 12.40 17.00 Weights 40% 10 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 1 2 Depreciation Base $ 310,000 310,000 310,000 310,000 310,000 310.000 3 Percentage Annual Depreciation Depreciation 0.200 $ 62,000 0.320 99,200 0.192 59,520 0.115 35,650 0.115 35,650 0.058 17.980| $ 310,000 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 1 2 3 Cash Flow $ 170,000 155,3001 122,880 105,663 85,413 125,4951 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 13.06% d-1. Determine the net present value. (Use the WACC from part crounded 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 $ 87,871.59 Wrong Answers d-2. Should DataPoint purchase the new equipment? O Yes O No

Answer 1

Detailed answer is provided in the hand the hand written notes below.

Answer to Question (d) 1 calculation of present value of inflows Year Cash flow pr@ 13.06% cash flow PV af 1 170000 0-884486 150362-62 2 155300 0-782316 121403.67 3 122880 0-691947 85026.45 4 105663 0.612018 6466 7.66 S 85413 0 Su 1321 46235.85 6 COOPS.88 125495 0.478791 including working capital see recovery of $52000 $ 527872-13 PV of cash inflows Presend value of cash outflow cost of Equipment t Additional Initial Inveement 310000 +Boooo $ 440000 Net Present Value pv af cash In flows PV of eash outflow $ 527872-13-440000 19 87872-13 (d)-2 Yes, Dala point should purchase the new equipment.