Question
Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR).Refer to table 12-11 to determine in
Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR).Refer to table 12-11 to determine in what depreciation the category of assets fall. (HINT: not 10 years)
The asset will cost $170,000 and it will produce earnings before depreciation and taxes of $58,000 per year for three years and then $27,000 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 the analysis if you have years in which there is no depreciation then enter zero for depreciation. Use table 12-12. Use appendix B for an approximate answer but calculate your answer using the formula and financial calculator method.
A. Calculate the net present value- ?
Here is the link for table 12-11
https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/finance/block_17e/table_12-11.jpg
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