Question
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $480,000. If the equipment is purchased, the following
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $480,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years.
| Earnings before Depreciation | |||||
| Year 1 | $ | 150,000 | |||
| Year 2 | 190,000 | ||||
| Year 3 | 120,000 | ||||
| Year 4 | 86,000 | ||||
| Year 5 | 76,000 | ||||
| Year 6 | 43,000 | ||||
The firm is in a 25 percent tax bracket and has a 13 percent cost of capital.
a. Calculate the net present value.
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The Bank Analysts Handbook Money Risk And Conjuring Tricks
Authors: Stephen M. Frost
1st Edition
0470091185, 978-0470091180
