Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $320,000. If the
equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table
12-12.
Earnings
before
Depreciation
Year 1
$112,000
Year 2
150,000
Year 3
80,000
Year 4
53,000
Year 5
Year 6
57,000
34,000
The firm is in a 25 percent tax bracket and has a 13 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.)
Net present value
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Transcribed Image Text:Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $320,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12-12. Earnings before Depreciation Year 1 $112,000 Year 2 150,000 Year 3 80,000 Year 4 53,000 Year 5 Year 6 57,000 34,000 The firm is in a 25 percent tax bracket and has a 13 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.) Net present value
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