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.