Problem 12-26 (Algo) MACRS depreciation and net present value [LO12-4] Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $300,000. 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 $ 82,000

Year 2 110,000

Year 3 80,000

Year 4 51,000

Year 5 45,000

Year 6 28,000

The firm is in a 25 percent tax bracket and has a 11 percent cost of capital. Calculate the net present value. Note: 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.

Net Present Value: ___________

Under the net present value method, should Oregon Forest Products purchase the equipment asset?

multiple choice Yes No