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Q11. Universal Electronics Universal Electronics is considering the purchase of manufacturing equipment with...

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Accounting

Q11. Universal Electronics

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Universal Electronics is considering the purchase of manufacturing equipment with a 10 -year midpoint in its asset depreclation range (ADR). Carefully refer to Table 12-11 to determine in what depreclation category the asset falls. (Hint: It is not 10 years.) The asset will cost $160,000, and it will produce eamings before depreclation and taxes of $60,000 per year for three years, and then $26,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capltal is 11 percent. In doing your analysis, If you have years in which there is no depreclation, merely enter a zero for depreclation. Use Table 12-12. Use Apoendlx B for an approximate answer but calculate your final answer using the formula and financlal calculator methods. a. Calculate the net present value. Note: Do not round intermedlate calculations and round your answer to 2 decimal places. b. Based on the net present value, should Universal Electronics purchase the asset? Yes No

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