Universal Electronics is considering the purchase of manufacturing equipment with a $10-$year midpoint in its asset depreciation range $($ADR$).$ Carefully refer to Table $12-11$ to determine in what depreciation category the asset falls. $($Hint: It is not $10$ years.$)$ The asset will cost $$120,000,$ and it will produce earnings before depreciation and taxes of $$35,000$ per year for three years, and then $$16,000$ a year for seven more years. The firm has a tax rate of $25$ percent. Assume the cost of capital is $11$ percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table $12-12.$ 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.

Net present value

b$.$ Based on the net present value, should Universal Electronics purchase the asset?

Yes

No