Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The...
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Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $480,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years.
Earnings before Depreciation
Year 1
$
150,000
Year 2
190,000
Year 3
120,000
Year 4
86,000
Year 5
76,000
Year 6
43,000
The firm is in a 25 percent tax bracket and has a 13 percent cost of capital.
a. Calculate the net present value.
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