Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is
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Question:
Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $280,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. UseTable 12-12. UseAppendix Bfor an approximate answer but calculate your final answer using the formula and financial calculator methods.
Earnings before Depreciation
Year 1$79,000
Year 292,000
Year 365,000
Year 444,000
Year 534,000
Year 625,000
The firm is in a 30 percent tax bracket and has a 9 percent cost of capital.
a.Calculate the net present value.
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