Table 12-12 Depreciation percentages (expressed in decimals) Depreciation Year 20-Year MACRS 1 2 3 3-Year MACRS 0.333 0.445 0.148 0.074 5-Year MACRS 0.200 0.320 0.192 0.115 0.115 0.058 7-Year MACRS 0.143 0.245 0.175 0.125 0.089 0.089 0.089 0.045 4 5 10-Year MACRS 0.100 0.180 0.144 0.115 0.092 0.074 0.066 0.066 0.065 0.065 0.033 6 7 15-Year MACRS 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 8 9 10 11 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 12 13 14 15 16 17 18 19 20 21 0.045 0.017 1.000 1.000 1.000 1.000 1.000 1.000 Appendix B Present value of $1, PVF PV = FV 1 (1 + i)" Percent Period 1% 3% 4% 5% 6% 8% 9% 11% 12% 1 0.943 0.893 0.990 0.980 0.971 0.943 0.926 0.857 7% 0.935 0.873 0.816 2 0.962 0.925 0.889 0.855 0.890 0.952 0.907 0.864 0.823 0.917 0.842 0.772 0.708 10% 0.909 0.826 0.751 0.683 0.901 0.812 0.731 0.797 0.712 3 0.840 0.915 0.888 0.794 0.735 4 0.792 0.763 0.659 0.636 0.971 0.961 0.951 0.942 5 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.863 0.784 0.747 0.621 0.593 0.567 0.681 0.630 6 0.507 0.705 0.665 0.535 0.482 7 0.583 0.452 8 0.627 0.540 0.434 0.404 0.933 0.923 0.914 0.905 0.837 0.813 0.789 0.766 0.744 0.722 9 0.500 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.746 0.711 0.677 0.645 0.614 0.585 0.557 0.530 0.505 0.481 10 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.592 0.558 0.527 0.463 0.429 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.361 0.322 0.287 11 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.896 0.804 0.391 0.352 0.317 0.286 0.258 0.232 12 0.788 0.397 0.257 13 0.368 0.340 0.773 0.758 0.743 0.229 0.205 14 0.887 0.879 0.870 0.861 0.853 0.844 15 0.555 0.362 0.315 0.239 0.209 0.183 0.163 16 0.728 0.458 0.339 0.188 17 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 0.478 0.412 0.170 0.146 0.714 0.700 0.686 0.436 0.416 0.292 0.270 0.250 0.317 0.296 18 0.836 0.497 0.469 0.442 0.417 0.394 0.371 0.350 0.331 0.312 0.233 0.174 0.097 0.054 0.212 0.153 0.534 0.513 0.494 0.475 0.456 0.375 0.130 19 0.828 0.396 0.116 0.232 0.215 0.218 0.198 0.180 0.164 0.149 0.092 0.057 20 0.277 0.258 0.184 0.820 0.780 0.104 0.673 0.610 0.194 0.178 0.116 0.075 0.377 0.295 0.231 0.138 0.124 0.074 0.044 25 0.146 0.059 30 0.742 0.552 0.131 0.099 0.308 0.208 40 0.672 0.453 0.307 0.142 0.067 0.046 0.032 0.022 0.015 0.005 0.033 0.011 0.003 50 0.608 0.372 0.228 0.141 0.087 0.034 0.021 0.013 0.009 Appendix B (concluded) Present value of $1 Percent Period 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 35% 40% 50% 1 0.885 0.877 0.862 0.840 0.833 0.800 0.741 0.714 0.667 0.847 0.718 2 0.783 0.743 0.694 0.640 0.769 0.675 0.444 0.855 0.731 0.624 0.534 0.870 0.756 0.658 0.572 0.497 0.769 0.592 0.455 0.706 0.593 3 0.579 0.512 0.693 0.613 0.543 0.641 0.552 0.609 0.515 0.549 0.406 0.301 0.510 0.364 0.260 0.296 0.198 4 0.592 0.499 0.482 0.350 0.269 5 0.519 0.476 0.456 0.419 0.402 0.223 0.186 0.410 0.328 0.262 0.210 6 0.480 0.425 0.456 0.400 0.432 0.376 0.327 0.437 0.370 0.314 0.266 0.410 0.354 0.305 0.390 0.333 0.352 0.296 0.335 0.279 0.233 0.207 0.159 7 0.165 0.122 0.132 0.088 0.059 0.133 0.095 0.068 8 0.376 0.351 0.285 0.249 0.168 0.123 .091 0.039 9 0.333 0.209 0.308 0.270 0.284 0.247 0.263 0.227 0.243 0.208 0.225 0.191 0.134 0.107 0.094 0.073 0.067 .050 .048 0.035 0.026 0.017 10 0.295 0.176 0.194 0.162 0.135 0.1 12 11 0.012 0.261 0.231 0.237 0.208 0.215 0.187 0.163 0.195 0.168 0.162 0.137 0.148 . 124 .086 0.069 0.056 0.043 0.037 0.027 0.025 0.018 12 0.008 0.178 . 152 0.130 0.111 13 0.204 0.182 0.145 0.1 16 0.093 0.055 0.033 .020 0.005 0.104 .088 14 0.160 0.141 0.125 0.099 0.078 0.044 0.025 0.003 0.181 0.160 15 0.108 0.065 0.020 0.002 0.140 0.123 0.108 0.095 .081 16 0.123 0.107 0.093 0.141 0.015 0.011 0.008 .084 .071 0.060 .093 0.054 0.035 0.028 0.023 0.002 0.015 0.012 .013 0.009 .006 0.005 .003 0.002 0.002 0.001 17 0.074 .062 .052 0.044 .037 0.125 0.080 0.045 0.006 0.069 0.059 .001 18 0.095 0.081 0.069 .051 0.038 0.018 .001 0.009 0.007 19 0.083 0.060 0.051 0.043 .031 0.014 0.111 0.098 .087 0.047 0.026 0.008 0.005 .003 .002 0.001 20 25 30 0.073 0.038 0.020 0.005 0.070 0.061 0.030 0.015 0.004 0.001 0.051 .024 0.012 0.003 .043 0.020 0.009 0.002 0.037 .016 0.007 0.001 .031 .013 0.005 0.001 0.026 0.010 0.004 .012 0.004 0.001 0.005 0.001 40 0.001 50 0.002 0.001 0.001 The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $160,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12. Year 1 Year 2 Year 3 Year 4 $ 90,000 101,000 46,000 44,000 The firm is in a 30 percent tax bracket and has a cost of capital of 16 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. (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 Summit Petroleum Corporation purchase the asset? O Yes O No