Question
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $280,000. 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 $280,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12-12.
Earnings before Depreciation
Year 1 $81,000
Year 2 106,000
Year 3 75,000
Year 4 48,000
Year 5 39,000
Year 6 27,000
The firm is in a 25 percent tax bracket and has a 11 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.)
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