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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
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. The firm is in a 35 percent tax bracket and has an 8 percent cost of capital. 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. Note: Do not round intermediate calculations and round your answer to 2 decimal places. b. Under the net present value method, should Summit Petroleum Corporation purchase the asset? Yes No
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