Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $260,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

Year 1	$	78,000
Year 2		86,000
Year 3		60,000
Year 4		40,000
Year 5		33,000
Year 6		24,000

The firm is in a 40 percent tax bracket and has a 8 percent cost of capital.

a.	Calculate the net present value. (A 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 Oregon Forest Products purchase the equipment asset?

	Yes
	No