Under the net present value method

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Reference no: EM13907326

Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $240,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years.

Year 1 $ 77,000

Year 2 78,000

Year 3 57,000

Year 4 39,000

Year 5 29,000

Year 6 23,000

The firm is in a 35 percent tax bracket and has a 12 percent cost of capital.

A) Calculate the net present value.

B) Under the net present value method, should Oregon Forest Products purchase the equipment asset? (YES or NO).

Reference no: EM13907326

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