Qualifies for three-year macrs depreciation

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The Summitt Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $260,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-9.

Year 1 $116,000

Year 2 146,000

Year 3 56,000

Year 4 54,000

The firm is in a 30 percent tax bracket and has an 7 percent cost of capital. Use Appendix B

(a) Calculate the net present value. (Round "PV Factor" to 3 decimal places, intermediate calculations and final answer to the nearest whole dollar amount. Omit the "$" sign in your response.)

Reference no: EM131347649

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