Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $500,000. 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 $160,000 215,000 125,000 89,000 78,000 44,000 The firm is in a 35 percent tax bracket and has a 12 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 Table 12-12 Depreciation percentages (expressed in decimals) 3-Year MACRS MACRS MACRS MACRS MACRS MACRS Depreciation 5-Year 7-Year 10-Year 15-Year 20-Year Year 1 2 0.200 0.320 0.192 0.115 0.115 0.058 0.100 0.180 0.144 0.115 0.092 0.074 0.066 0.066 0.065 0.065 0.033 0.050 0.095 0.086 0.077 0.069 0.062 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.030 ..0.333 0.445 0.143 0.245 0.175 0.125 0.089 0.089 0.089 0.045 0.038 0.072 0.067 0.062 0.057 0.053 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.017 1.000 4 5 6 7 8 .. 0.074 10.. 13 15.. 16 20 21.. 1.000 1.000 1.000 1.000 1.000 7795 7 2 2 1000000000000 374 162 1000000000000000000000000 520 8877 1 7 0000000000000 0. 0 0 0 0 0 0 0 0 0. 777666 44433 544 7 739 11123 8278 87 1 680 1000000000000000000000000 1234567890123456789 20 25 30 40 50 Appendlx B (concluded) Percent 7 0.7180.706 0.694 0.640 0.592 0.549 0.510 0.444 0.624 0.609 0.593 0.579 0.512 0.455 0.406 0.364 0.296 0.613 0.592 0.572 0.552 0.534 0.515 0.499 0.482 0.410 0.350 0.301 0.260 0.198 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.328 0.269 0.223 0.186 0.132 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.262 0.207 0.165 0.133 0.088 314 0.296 0.279 0.210 0.159 0.122 0.095 0.059 0.068 0.039 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.134 0.094 0.067 0.048 0.026 0.327 0.305 0.285 0.266 0.249 0.233 0.168 0.123 0.091 0 2 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.069 0.043 0.027 0.018 0.008 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.055 0.033 0.020 0.013 0.005 5 0.160 0.140 0.123 0.108 0.095 0.084 0.0740.065 0.035 0.020 0.0110.006 0.002 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.023 0.012 0.006 0.003 0.001 0.111 0.095 0.081 0.069 0.059 0.051 0.0440.038 0.018 0.009 0.005 0.002 0.00 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.004 0.001 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.001