The Summitt Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $360,000 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	$	175,000
Year 2		218,000
Year 3		83,000
Year 4		70,000

The firm is in a 35 percent tax bracket and has an 12 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

Depreciation Year 10 11 12 13 14 15 16 17 19 20 21 3-Year 5-Year 7-Year 10 Year 15-Year 20-Year MACRS MACRS MACRS MACRS MACRS MACRS 050 333 038 .200 143 100 095 445 320 .245 180 086 067 148 192 175 144 074 062 115 125 115 077 069 115 089 092 057 053 058 089 074. 062 045 089 066 059 059 045 066 045 065 059 045 065 045 059 059 045 033 059 045 059 045 059 045 059 045 0455 030 045 045 045 045 017 1.000 1.000 1.000 1.000 1.000 1.000