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
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
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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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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