Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The...
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Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $400,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Earnings before Depreciation:
Year 1: $119,000 Year 2: 175,000 Year 3: 120,000 Year 4: 65,000 Year 5: 68,000 Year 6: 38,000
The firm is in a 25 percent tax bracket and has a 12 percent cost of capital.
A. Calculate the net present value. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole dollar amount.)
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