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Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Tabie 12-11 to
Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Tabie 12-11 to determine in what depreciation category the asset falls. (Hint it is not 10 years) The asset will cost $200,000, and it will produce eamings before depreciation and taxes of $60,000 per year for three years, and then $30,000 a year for seven more years. The firm has a tax rate or 25 percent. Assume the cost of capital is 12 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 0. Caiculate the net present value Note: Do not round intermediate calculations and round your answer to 2 decimal places. b. Based on the net present value, should Universal Electronics purchase the asset? Table 1212 Depreciation vercentages (expressed in decimals) w=pia+on
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