Problem 12-27 (Algo) MACRS depreciation and net present value [LO12-4] Universal Electronics is considering the purchase of manufacturing equipment with a foyear midpoint in its asset depreciation range (ADK). Garefully refer to lable 12-if to determine in what depreclation category the asset lalk (Hirit it is not 10 years) The wiset will cost $225,000, and it will prochiuce eamings before depreclation and taxes or $74,000 per year for three years, and then $36,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of cepital is 14 percent in doing yout anatysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use rable 12-12. Use Appendix Blor ani approximate answer but calculate your finat answer using the formula and financial calculator methodi. a. Calculate the net present value. Note: Do not round intermediate calculotions and round your onswar to 2 decimol places. b. Based on the niet present value, should Univessal Bectronics purchase the assel? Appendix 1 PY=PYY(t+1) Table 12-12 Depreciation percentages (expressed in decimals \begin{tabular}{|c|c|c|c|c|c|c|} \hline Depreciation Year & 3 Year MACRS & 5-Year MACRS & 7-Year MACRS & 10-Year MACRS & 15-Year MACRS & 20-Year MACRS \\ \hline 1 & 0.333 & 0.200 & 0.143 & 0.100 & 0.050 & 0.038 \\ \hline 2 & 0.445 & 0.320 & 0.245 & 0.180 & 0.095 & 0.072 \\ \hline 3 & 0.148 & 0.192 & 0.175 & 0.144 & 0.086 & 0.067 \\ \hline 4 & 0.074 & 0.115 & 0.125 & 0.115 & 0.077 & 0.062 \\ \hline 5 & & 0.115 & 0.089 & 0.092 & 0.069 & 0.057 \\ \hline 6 & & 0.058 & 0.089 & 0.074 & 0.062 & 0.053 \\ \hline 7 & & & 0.089 & 0.066 & 0.059 & 0.045 \\ \hline 8 & & & 0.045 & 0.066 & 0.059 & 0.045 \\ \hline 9 & & & & 0.065 & 0.059 & 0.045 \\ \hline 10 & & & & 0.065 & 0.059 & 0.045 \\ \hline 11 & & & & 0.033 & 0.059 & 0.045 \\ \hline 12 & & & & & 0.059 & 0.045 \\ \hline 13 & & & & & 0.059 & 0.045 \\ \hline 14 & & & & & 0.059 & 0.045 \\ \hline 15 & & & & & 0.059 & 0.045 \\ \hline 16 & & & & & 0.030 & 0.045 \\ \hline 17 & & & & & & 0.045 \\ \hline 19 & & & & & & 0.045 \\ \hline 20 & & & & & & 0.045 \\ \hline \end{tabular} Problem 12-27 (Algo) MACRS depreciation and net present value [LO12-4] Universal Electronics is considering the purchase of manufacturing equipment with a foyear midpoint in its asset depreciation range (ADK). Garefully refer to lable 12-if to determine in what depreclation category the asset lalk (Hirit it is not 10 years) The wiset will cost $225,000, and it will prochiuce eamings before depreclation and taxes or $74,000 per year for three years, and then $36,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of cepital is 14 percent in doing yout anatysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use rable 12-12. Use Appendix Blor ani approximate answer but calculate your finat answer using the formula and financial calculator methodi. a. Calculate the net present value. Note: Do not round intermediate calculotions and round your onswar to 2 decimol places. b. Based on the niet present value, should Univessal Bectronics purchase the assel? Appendix 1 PY=PYY(t+1) Table 12-12 Depreciation percentages (expressed in decimals \begin{tabular}{|c|c|c|c|c|c|c|} \hline Depreciation Year & 3 Year MACRS & 5-Year MACRS & 7-Year MACRS & 10-Year MACRS & 15-Year MACRS & 20-Year MACRS \\ \hline 1 & 0.333 & 0.200 & 0.143 & 0.100 & 0.050 & 0.038 \\ \hline 2 & 0.445 & 0.320 & 0.245 & 0.180 & 0.095 & 0.072 \\ \hline 3 & 0.148 & 0.192 & 0.175 & 0.144 & 0.086 & 0.067 \\ \hline 4 & 0.074 & 0.115 & 0.125 & 0.115 & 0.077 & 0.062 \\ \hline 5 & & 0.115 & 0.089 & 0.092 & 0.069 & 0.057 \\ \hline 6 & & 0.058 & 0.089 & 0.074 & 0.062 & 0.053 \\ \hline 7 & & & 0.089 & 0.066 & 0.059 & 0.045 \\ \hline 8 & & & 0.045 & 0.066 & 0.059 & 0.045 \\ \hline 9 & & & & 0.065 & 0.059 & 0.045 \\ \hline 10 & & & & 0.065 & 0.059 & 0.045 \\ \hline 11 & & & & 0.033 & 0.059 & 0.045 \\ \hline 12 & & & & & 0.059 & 0.045 \\ \hline 13 & & & & & 0.059 & 0.045 \\ \hline 14 & & & & & 0.059 & 0.045 \\ \hline 15 & & & & & 0.059 & 0.045 \\ \hline 16 & & & & & 0.030 & 0.045 \\ \hline 17 & & & & & & 0.045 \\ \hline 19 & & & & & & 0.045 \\ \hline 20 & & & & & & 0.045 \\ \hline \end{tabular}