10)

The Summitt Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $280,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: UseTable 12-12.

Year 1	$	139,000
Year 2		182,000
Year 3		64,000
Year 4		62,000

The firm is in a 35 percent tax bracket and has a cost of capital of 12 percent. UseAppendix Bfor an approximate answer but calculate your final answer using the formula and financial calculator methods.

a.	Calculate the net present value.(Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)

Net present value

$

b.	Under the net present value method, should Summitt Petroleum Corporation purchase the asset?
	Yes No