Question
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $320,000. 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 $320,000. 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.
Earnings before Depreciation | |||||
Year 1 | $ | 112,000 | |||
Year 2 | 150,000 | ||||
Year 3 | 80,000 | ||||
Year 4 | 53,000 | ||||
Year 5 | 57,000 | ||||
Year 6 | 34,000 | ||||
The firm is in a 25 percent tax bracket and has a 13 percent cost of capital.
a. Calculate the net present value. (A negative amount should be indicated by a minus sign. Do not round intermediate calc
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $320,000. 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 Year 2 Year 3 Year 4 Year 5 Year 6 Earnings before Depreciation $ 112,000 150,000 80,000 53,000 57,000 34,000 The firm is in a 25 percent tax bracket and has a 13 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 the nearest whole dollar amount.) Answer is complete but not entirely correct. Net present value $ (37,069.00)Step by Step Solution
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