2. Archer Chemical Corp. is considering purchasing new equipment that falls under the three-year MACRS category. The cost is $200,000. Earnings before depreciation and taxes for the next four years will be:

Year 1 .................. $ 90,000 Year 2 .................. 105,000 Year 3 .................. 85,000 Year 4 .................. 35,000 The firm is in a 30 percent tax bracket and has a 12 percent cost of capital. Should it purchase the new equipment?