Reference no: EM132549818

The Woodruff Corporation purchased a piece of equipment three years ago for $214,000. It has an asset depreciation range (ADR) midpoint of eight years. The old equipment can be sold for $94,000.

A new piece of equipment can be purchased for $331,500. It also has an ADR of eight years.

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

Year       NewEquipment   Old Equipment

1...............$80,500          $24,250

2...............77,500               14,750

3...............70,750                  8,750

4...............62,000                 6,250

5...............50,750                 4,500

6...............43,500                -7,500

The firm has a 25 percent tax rate and a 9 percent cost of capital.

Question 1: What is the net cost of the new equipment? Round your solution to two decimal places.

Question 2: What is the present value of incremental benefits? Round your solution to two decimal places.

Question 3: What is the NPV of this replacement decision? Round your solution to two decimal places.