The Summitt Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $260,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-9.

rev:4_5_2013_QC_29129

Year 1	$	130,000
Year 2		173,000
Year 3		62,000
Year 4		60,000

The firm is in a 35 percent tax bracket and has an 16 percent cost of capital. Use Appendix B

(a)	Calculate the net present value. (Round "PV Factor" to 3 decimal places, intermediate calculations and final answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

Net present value

$

(b)

Under the net present value method, should Summit Petroleum Corporation purchase the asset?

	Yes
	No

rev: 12_14_2012