Question

Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $300,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years.
Year 1 ....... $112,000
Year 2 ....... 105,000
Year 3 ....... 82,000
Year 4 ....... 53,000
Year 5 ....... 37,000
Year 6 ....... 32,000
The firm is in a 30 percent tax bracket and has a 14 percent cost of capital. Should Oregon Forest Products purchase the equipment? Use the net present value method.



$1.99
Sales3
Views203
Comments0
  • CreatedOctober 14, 2014
  • Files Included
Post your question
5000